The gold bulls are taking the metal higher in early action Monday as the new trading week gets underway. A crude oil rally and a break in the dollar’s ascension are likely the key contributors to gold’s upside today. The yellow metal is getting a break from recent selling pressure that has driven it sharply lower and done so quickly. The bears have the $1700 level in their sites, although it does not appear that today will see a challenge of this key technical level.

A lack of fresh market news early this week has traders focusing their attention on the outside markets. A solidly lower Dollar Index could fuel further buying in gold throughout the session. Stock markets will see some focused attention this week and in the weeks ahead. Corporate earnings may become the key driver of financial markets in the weeks ahead.

Slow Summer Days Ahead

The summer doldrums are rapidly approaching. Market action could remain mostly sideways with little to no follow-through until traders return from the Labor Day Weekend in September. Until that time, many traders and investors will remain more focused on BBQs and vacations than the markets.

Central Bank Activity

Both traders and investors will look ahead to this week’s ECB meeting. The European Central Bank is expected to raise interest rates for the first time in 11 years on Thursday. The U.S. Federal Reserve is widely expected to follow suit and raise rates itself the following week. The Fed is believed to be planning on hiking rates by 75-basis points. Some have suggested that a full, 100bps hike is possible. The uncertainty surrounding the Fed’s plans could keep some volatility in the marketplace beforehand.

As the markets await the Fed, attention is likely to become focused on key outside markets and any fresh news that hits the wires. Crude oil is rallying today, hitting the $99.50 per barrel level. A move above this level, putting “black gold” back above the $100 mark, could attract a fresh wave of buyers and could see prices for crude ascend rapidly back to $110 or higher. Should that prove to be the case, it could be bullish for gold.

Treasury Yields

Yields have taken a dip recently and are sitting around the 2.95% area today. A move for the benchmark 10-Year Note yield back above the 3% level could also attract more market participants. Further selling of the 10-Year could see yields spike back above 3% and even well-beyond that level. Higher yields could be bearish for gold, as they may reinforce opportunity cost concerns.

                                                                                                                                                                                         Source:macrotrends.net

The market bears remain in firm control on the daily chart. The bears will look first at producing a close below the $1700 level. If completed, they will then target key support at the $1650 area. The bulls are needing to take prices back above $1750, and the sooner the better. If able to do so, the bulls will then target the $1800 level. Any real excitement is unlikely to be seen, however, unless the bulls produce a close above $1900.

Bitcoin

Cryptocurrency Bitcoin is off to a strong start this week. The currency is up nearly 7% in early action Monday. Market participants are hoping recent contagion has run its course and that brighter days may be ahead.

With Bitcoin back above the $22,000 level, it is at its highest level in over a month. The cryptocurrencies may also be seeing some benefit from higher stocks today. These markets have shown a strong tendency to trade with stocks. Bitcoin, in particular, has shown a tight relationship to equity market trade. Better sentiment and higher trade in stocks may mean the same for Bitcoin.

Despite today’s strong showing for Bitcoin and other cryptocurrencies, worries do remain. The high degree of leverage and borrowing is to blame, according to some, for the latest round of crypto carnage. Crypto companies have been forced to sell off assets in order to meet obligations, and that has kept the market under pressure. There are some signs that the pressure may be easing, however. Some analysts have suggested the worst of the forced selling is behind the market. That could lead the way to higher Bitcoin and cryptocurrencies in the months ahead.

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