Gold seems to have stopped the bleeding, for now

Gold seems to have managed to stop the bleeding, as for the current week, gold currently seems to be in an upwards trajectory, once again the correlation of the USD with gold’s price seems to be maintained and maybe the main factor behind the movement of gold’s price currently. We note the potential for high volatility in the gold market, due to the current BRICS conference which is currently underway. In this report, we aim to shed light on the catalysts driving gold’s price, assess its future outlook and conclude with a technical analysis.

BRICS summit begins.

As of today, the widely anticipated BRICS summit appears to have begun. It has been widely speculated that part of the discussion between the summit leaders, could potentially include a discussion about a formation of a common currency that could be backed by a basket of precious 金属, in particular gold. In the event that a framework is laid out for the gradual adoption of a common currency which is backed by a basket of precious 金属, we may see the precious gaining ground, as it could mark the beginning of a shift back to the gold standard.

Furthermore, with the possibility of new members being announced who have already expressed interest in joining the bloc, such as Saudi Arabia and the UAE, talks about potential de-dollarization, may provide support for the precious metal, as a gradual shift away from the greenback as the worlds reserve currency, could weaken the dollar and could facilitate inflows into gold, given their inverse relationship.

However, it is unlikely that the BRICS will announce a rapid plan to move away from the dollar or a common currency backed by gold. Therefore, gold’s price may be dictated by news reports stemming from the conference which may indicate these alleged moves of de–dollarization or a common currency backed by a basket of precious 金属.

FOMC July meeting minutes open the door for future rate hikes.

Last Thursday, the FOMC July meeting minutes, indicated that “most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy”, implying that the bank may continue its in rate hiking path. Yet two officials favored leaving rates unchanged, potentially hinting at some signs of dissent in the FOMC.

It would appear that the potential for future rate hikes seemed to have provided support for the greenback and potentially may have aided in the deterioration of the precious metal, as the dollar strengthens the precious metal is more expensive for overseas investors, highlighting once again their inverse relationship.

Furthermore, the US Treasury Yields, continue to remain at elevated levels as was mentioned in last week’s report and at the time of this report the US 10-Year Treasury yields having reached levels last seen in November 2007, it could potentially indicate that the markets are still operating under the assumption that interest rates in the US may stay at current levels 或者 higher for a prolonged period of time.

Therefore, should Fed Chair Powell’s comments during his speech at the Jackson Hole conference be interpreted as hawkish in nature, we could potentially see the greenback strengthening and it could potentially weigh on the price of the precious, given the inverse relationship experienced between gold and the greenback.

技术分析

黄金/美元4小时走势图

• 支撑: 1900 (S1), 1865 (S2), 1830 (S3)
• Resistance: 1920 (R1), 1943 (R2), 1971 (R3)

The precious metal appears have reversed course, with the precious appearing to have broken above the $1900 (S1) key psychological support level. We tend to maintain a bullish outlook for the commodity and supporting our case is the RSI indicator below our 4-Hour chart which currently has broken above the figure of 50, implying a switch from a bearish market sentiment to a bullish market sentiment, in addition to breaking above the downwards moving trendline, incepted on the 31st of July and the downwards moving channel incepted on the 4th of August.

For our bullish outlook to continue, we would like to see a clear break above the 1920 (R1) resistance level, with the next possible target for the bulls being the 1943 (R2) resistance ceiling in addition to continuing to validate our upward-moving trendline formed on the 21   of August. On the other hand, for a  bearish outlook, we would like to see a clear break below the 1900 (S1) key psychological support level and a clear break below the 1865 (S2) support level, with the next possible target for the bears being the 1865 (S2) support base.

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