Where is Gold headed? Watch the DXY to help determine direction!

If the DXY continues lower and can take out the 91.50 level, Gold should go bid.

Gold 2

The Scenario: Its FOMC day.  Gold (XAU/USD) is pulling back, down roughly $60 from its recent highs on June 1st near 1917.39 and is trading near 1856.  The FOMC releases there June statement and growth and inflation forecasts: HAWKISH! Gold crashes! Price moves from 1859 down to 1803 and continues to fall the next day to 1767! 

How to start gold trading

But price has halted there and has been held up by strong horizontal support at 1756.26 dating back to March, as well as, the 61.8% Fibonacci retracement from the lows of March 31st to the highs of June 1st, near 1769.37.  On a 240-minute timeframe, the RSI has unwound from oversold territory, however, is still putting in lower highs.  For bulls to gain control, a move above the recent June 18th highs of 1797.25 would be required.

Source: Tradingview, City Index

On a daily timeframe, XAU/USD has pulled back to the 50% retracement level from the March 2020 lows to the August 2020 highs near 1763.19.  In addition, the 1756 level has acted as strong support and resistance going back to May 2020.  The RSI on the daily timeframe has just turned up from oversold conditions and is barely neutral at 34.23. For bears to gain control, they would need to push Gold below the 1756 level.

Source: Tradingview, City Index

At the bottom of the chart above is the correlation coefficient between the XAU/USD and the US Dollar Index (DXY).  Notice the reading is -1.00 on the daily timeframe.  This means that there is a PERFECT negative correlation right now between Gold and the US Dollar.  So, if one goes up, the other goes down!  Therefore, traders can also look at a daily chart of the DXY to get a better idea of what direction Gold may be headed next.

Learn Everything you need to know about DXY

On a daily timeframe, DXY retraced, and closed above, the 61.8% Fibonacci retracement level from the highs of March 31st to the lows of May 25th.  However, on Monday, the index reversed and closed back below Friday’s open and gave back all its gains.  Strong support is down near 91.50, which is the 200 Day Moving Average and previous resistance (now support).  It was also the 50% retracement from the previous mentioned timeframe. Support below there is 90.90. 

Source: Tradingview, City Index

Therefore, if the DXY does continue lower on a daily timeframe and can take out the 91.50 level, Gold should go bid.  However, if DXY trades above Friday’s highs of 92.40, Gold should continue moving lower and take out the 1756 level.  Watch Gold in the short-term 240-minute timeframe for more direction as to where the precious metal may be headed next!

Learn more about gold and silver trading opportunities.


This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.