Gold Analysis Today: Interrupting the bears

The downward movement of gold’s price seems to have been interrupted since the end of the past week. The rise of US yields over the past few days may have clipped the potential gains of gold’s price, while USD’s relative inactivity may have allowed gold’s price to advance higher.

We expect fundamentals including the Fed’s intentions as well as financial data releases such as June’s US employment report to influence the precious metal’s price next week. In this report, we aim to shed light on the catalysts driving gold’s price, assess its future outlook and conclude with a 技术的 analysis.

More rate hikes ahead

The Fed’s intentions seem to remain hawkish. It’s characteristic that Fed Chairman Powell in his speech at ECB’s annual forum in Sintra Portugal, doubled down on the bank’s hawkish stance as he did not exclude the possibility of back-to-back rate hikes while also stating that “If you look at the data over the last quarter, what you see is stronger than expected growth, a tighter than expected labor market 和 higher than expected inflation …

That tells us that although policy is restrictive, it may not be restrictive enough and it has not been restrictive for long enough”. Overall should the Fed’s hawkishness be maintained we may see the USD gaining further ground and thus weighing on gold’s price.

Better than expected US data

On the other hand, we note that better-than-expected data from the US showed that consumer sentiment for June is more optimistic than expected, while at the same time, the number of new home sales for May was higher than expected, both pointing towards a more robust US economy and an appetite for more spending.

At the same time, the acceleration of the US GDP rate for Q1, tended to imply that the possibility of a recession in the US economy may be avoidable. Yet the release which may have characterized the week was on Friday, as the US core 和 headline PCE rates slowed down, maybe more than expected, implying that inflation is cooling off and thus weakening the USD allowing for Gold’s price to ascend higher.

Asian demand for gold remains mixed

We note Commerzbank analyst’s comments last Friday, that gold demand in China, the largest gold consumer worldwide, seems to have stabilised despite the weak economic recovery, which could be considered a positive for gold’s price.

On the other hand, it seems that demand in India is easing as investors in physical gold, coins 和 bars, are willing to postpone any purchases awaiting lower prices. At the same time, demand for jewelry seems also to have eased in India’s huge gold market. There are still mixed signals from the two Asian 个国家 and its characteristic of the lack of direction in the overall 黄金–market in our opinion.

Next tests for Gold’s price

In the coming days, we highlight two key 事件 for gold’s price. The first is to be the release of the Fed’s June meeting minutes tomorrow, Wednesday. The 该文件 is expected to be scrutinized by 交易員 和 analysts and should the Fed’s aggressiveness be evident, we may see gold’s price losing some ground. On Friday we highlight the release of the US employment report for June, The NFP figure is expected to drop, implying that the ability of the US economy to create new jobs is easing, while the unemployment rate is expected to drop as well implying that the US employment market is still tight. Lastly, the average earnings growth rate is expected to slow down a bit in a signal that the US employment market may ease its support for inflationary pressures in the US economy.

Overall, a possible disappointment of the markets should be expected, if the NFP figure drops as 低 as expected 或者 even lower, which in turn may weaken the USD allowing gold’s price to rise, yet the forecasts seem to imply that the US employment market is to remain tight, which may allow the Fed to continue its monetary policy tightening clipping any potential gains for the precious metal. We highlight that we may encounter increased 波动率 around the time of the release hence some caution is advisable.

Technical Analysis – Gold

黄金/美元4小时走势图

• 支撑: 1910 (S1), 1886 (S2), 1857 (S3)
• 阻力: 1932 (R1), 1955 (R2), 1983 (R3)

Gold’s price has ended its downward movement and seems to be rising as it takes aim of the 1932 (R1) resistance line. We tend to be bullish for the outlook of the precious metal’s price on a 技术的 level as long as the price action remains above the upward trendline which has started to form since the 30    of June.

Furthermore we note that the RSI indicator is rising 和 aiming for the reading of 70, implying that the bullish sentiment in the market seems to be building up for gold’s price. At the same time please note how gold’s price tends to near 和 test the upper Bollinger band, in a sign that it’s nearing overbought levels, which may cause for a correction lower or a possible slowing of the bulls’ appetite. Should the bulls maintain control over gold’s price we may see it breaking the 1932 (R1) resistance line and aim if not breach the 1955 (R2) resistance hurdle.

On the flip side, for a bearish outlook, we would require gold’s price to drop, break the prementioned upward trendline, in a first signal that the upward movement has been interrupted, break the 1910 (S1) support line 和 aim if not even break also the 1886 (S2) support barrier.     

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