Gold updates: Two weeks in the reds

黄金 seems to have moved in a downward fashion as we tend to maintain the view that the negative 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. In addition, we note the possibility of 高 波动率 in the gold markets during next week’s BRICS summit which is to be hosted in South Africa. We note as the next big test for gold’s price the release of the US CPI rates on Thursday as a possible acceleration of inflation rates may have a substantial negative impact on the precious metal’s price. 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.

China’s FX Reserves

China’s gold reserves grew by approximately 23 tons during July, marking 9 consecutive months of the Chinese central bank purchasing gold. In total, the most recent purchase has now brought the total gold reserves of China to 2,137 tonnes, edging closer and closer to overtaking Russia as the world’s 5th largest holder of gold reserves. Furthermore, despite rising interest rates across the world which could usually lead to reduced demand for the non-interest-bearing precious metal, the aggressive diversification of China’s reserves appears to have provided some support for the precious bullion on a more macro perspective. Therefore, should China continue to add to its gold reserves we may see some support for the precious metal in the long run.

Turkey Limits Gold Imports

According to a report by Reuters, Turkey is planning to impose a quota on the imports of precious 金属 in an attempt to reduce the negative impact of the country’s current account balance. Furthermore, the quota could potentially improve the country’s weakening currency which is still currently printing new all-time lows on a daily basis. According to the country’s Trade Ministry, imports of unprocessed gold for the first two quarters of 2023, increased by 180%. As such the quota could limit the availability of gold in the country and the extent it could be used to settle large-scale transactions instead of using the Turkish lira. Therefore, by eliminating other methods of payment, the Government could potentially “force” large-scale transactions to use the Turkish Lira to a greater extent, thus potentially increasing demand for the Turkish Lira, which in turn could be translated to Turkish lira strength. However, given Turkey’s minor role in the international gold market, it could be said that their actions may have little, to no impact on the overall direction of the bullion.

BRICS summit next week.

The BRICS summit is due to be hosted next Tuesday by South Africa. 黄金 traders may be highly interested in the meeting, as it had been previously reported by RT that the BRICS common currency would be discussed during the meeting, with the possibility that the common currency would be backed by gold. Should the markets witness a return to the gold standard, we may see a “gold rush” by Central Banks, in order to avoid being left behind. Therefore, in such an event, we may see Gold’s price moving significantly higher, as it could be interpreted as the beginning of a wider detachment from the dollar and a widening of the de-dollarization process, which despite being an extreme scenario, yet there has been some willingness by Governments to explore alternatives to the dollar after the US and its allies removed Russia from the SWIFT network and practically weaponized the USD.

技术分析

黄金/美元4小时走势图

• Support: 1920 (S1), 1895 (S2), 1865 (S3)
• Resistance: 1943 (R1), 1971 (R2), 2002 (R3)

The precious metal appears to be in a downward fashion, with the bullion now appearing to be aiming for the 1920 (S1) support level. We maintain a bearish outlook for the commodity and supporting our case is the RSI indicator below our 4-Hour chart which is currently aiming for the 30 figure, implying a bearish market sentiment, in addition to the downwards moving trendline, incepted on the 31  of July.

For our bearish outlook to continue, we would like to see a clear break below the 1920 (S1) support level, with the next possible target for the bears being the 1895 (S2) support base. On the other hand, for a bullish outlook, we would like to see a clear break above the 1943 (R1) resistance level, with the next possible target for the bulls being the 1971 (R2) resistance ceiling.

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