• Gold fiadollaryellow, closed the third week in a row in negative territory.
  • Falcon FOMC policy outlook weighed on rising US T-bond yields.
  • According to Analyst Eren Şengezer, the yellow gold price seems to have formed technical support at $1,740 before $1,730.

After the decline last week, the yellow gold prices recovered and closed in the positive zone on Monday and Tuesday. After hitting its strongest level on Wednesday, gold prices lost momentum as the FOMC strengthened with a hawkish policy outlook. Rising US Treasury bond yields added to the bearish pressure in the second half of the week, with the pair slumped to a multi-week low of $1,713 on Thursday before posting a technical recovery and closing near $1,750 on Friday.

What happened in the gold market last week?

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As we reported earlier , at the beginning of the week, concerns about the Evergrande crisis turning into a global turmoil caused market participants to take shelter in safe-haven assets. Even though the USD outperformed its risk-sensitive rivals, gold did not find it difficult to find demand. The S&P 500 Index opened with a large margin and lost 1.7% on Monday. In the absence of high-impact data releases, markets remained relatively calm on Tuesday and investors stayed on the sidelines.

In its Asian trading series on Wednesday, the People’s Bank of China announced that it left the 1-year and 5-year LPRs at 3.85% and 4.65%, respectively, as expected. However, the PBoC also decided to inject around 110 billion Chinese yuan in short-term cash, helping the market mood to improve. With risk flows returning to the markets, the USD lagged behind on Wednesday, allowing XAU/USD to extend its recovery. Still, the FOMC’s policy statements in the second half of the day supported the dollar and forced gold to turn south.

The FOMC left the benchmark interest rate, the target range for federal funds, unchanged at 0-0.25%, as was widely expected after its September policy meeting. In its policy statement, the Fed noted that if progress toward employment and inflation targets continues as expected, a moderation in the pace of asset purchases could be assured soon. The failure of the publication to offer a contraction timeline caused the USD to weaken with the initial reaction. However, the updated Foresight Summary revealed that the number of policy makers expecting a rate hike in 2022 rose from 7 to 9 in June.

These data affected the gold price in the past week!

More importantly, FOMC President Jerome Powell announced that the language in the statement means to mark the bar for contraction, and that this can be met as soon as possible at the next meeting. In addition, Jerome Powell said that they plan to complete the cut in mid-2022. While commenting on the disappointing August employment report, the President noted that the weak Non-Farm Employment Payroll reading was due to the sudden increase in coronavirus Delta cases.

Supported by the hawkish policy outlook, the US Dollar Index (DXY) climbed to a monthly high on Wednesday and XAU/USD closed a three-day winning streak. On Thursday, the impressive rise witnessed in US Treasury bond yields weighed heavily on gold, extending its decline to a 5-week low of $1,737. Meanwhile, the weekly publication of the U.S. Labor Department showed that Initial Unemployment Claims rose from 335,000 to 351,000. On the last trading day of the week, the yellow gold price made a technical correction towards $1,750.

Which developments are important for the yellow gold prices next week?

Monday will appear in August US Durable Goods Orders, but this data alone is unlikely to trigger a significant market reaction. On Tuesday, the Conference Board will release September Consumer Confidence data. On Thursday, the U.S. Bureau of Analysis will release its final forecast for second-quarter Gross Domestic Product (GDP) growth, along with the U.S. Labor Department’s weekly Initial Unemployment Claims report.

The Basic Personal Consumption Expenditure (PCE) Price Index, the Fed’s preferred inflation indicator, will be monitored for fresh momentum ahead of ISM Manufacturing PMI and UoM’s Consumer Sentiment Index data on Friday. Meanwhile, investors will be keeping a close eye on the movement of US T-bond yields and overall risk perception. 1% according to Eren Şengezer. 5, the indicator aligns as key resistance for the 10-year US yield, and a break above this level could trigger a rally and lead to another drop in gold prices.

Which levels will gold prices test yellow next week? The analyst explains

Despite Friday’s recovery, the Relative Strength Index (RSI) indicator on the daily chart remains near 40, showing that the bearish trend is intact, according to analyst Eren Şengezer. On the downside, static support for gold prices seems to have formed at $1,740 before $1,730 and $1,720.

On the other hand, a daily close above $1,770 (61.8% retracement of the Fibonacci April-June uptrend) for gold prices and yellows could attract buyers. According to Eren Şengezer, the gold price could target $1,790 (20-day SMA, 50-day SMA) before the yellow $1,800 (psychological level) and $1,805.

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Michael Lewis


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