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  • Gold fiadollar yellow regains safe haven status.
  • According to popular analyst Eren Şengezer, XAU/USD is likely to continue to move sideways between clearly defined technical levels.
  • Investors’ focus shifted to President Powell’s speech at the Jackson Hole Symposium.

Despite the broad-based USD strength, gold fiadollaryellow managed to remain resilient throughout the week with the risk-averse market environment enabling the precious metal to find demand. The XAU/USD pair edged lower on Thursday after surging to $1,800 in the first half of the week and closed the week above $1,780 almost unchanged.

What happened in the gold market last week?

Disappointing data from China, which showed that Retail Sales and Industrial Production grew at a slower pace than expected in July, suppressed market sentiment at the beginning of the week. Additionally, rising geopolitical tensions between the US and China, along with the increasing number of coronavirus Delta variant cases globally, have forced investors to seek refuge in safe-haven assets. Although the USD outperformed its rivals on Monday, gold had no trouble limiting its losses.

On Tuesday, the US Census Bureau reported that Retail Sales fell 1.1% month-on-month to $617.7 billion in July. The market mood remained sour as this pressure came in worse than the market’s expectation of a 0.3% decline. On a positive note, the Federal Reserve’s monthly publication Industrial Production showed an increase of 0.9% compared to analisdollarserine estimate of 0.4%, but that reading didn’t help the sentiment improve. On Wednesday, the minutes of the FOMC’s July policy meeting revealed that some policymakers saw fit to begin preparing for asset reductions soon.

The initial market reaction was the modest weakening of the dollar against its rivals, but the US Dollar Index (DX) regained its traction on the Fed’s policy tightening expectations, extending its Friday rally to 93.72, 2021 high. The U.S. Labor Department announced Thursday that Initial Unemployment Claims had dropped to 348,000, the lowest level since March 2020. However, these data were largely ignored by market participants. Cryptocoin. com, in the absence of high-level data releases on Friday, DXY corrected to the mid-93s but rose more than 1% for the week.

What’s important for next week’s gold prices yellow?

IHS Markit will release preliminary August Manufacturing and Services PMI reports for Germany, the Eurozone and the USA on Monday. Investors expect activity in the US manufacturing and services sectors to continue to grow at a strong pace, but will pay close attention to the details underlying pressures in input prices. If these reports confirm that inflation will stay higher than expected, the USD may maintain its solid stance. On Wednesday, Durable Goods Orders data from the US will be looked at to give new impetus ahead of Thursday’s weekly Initial Unemployment Claims report.

Additionally, the US Bureau of Analysis will release its second forecast for second-quarter GDP growth, which is unlikely to receive a noticeable reaction in the market. Finally, the Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation indicator, will be included in the US. On an annual basis, the Core PCE Price Index, which excludes volatile food and energy prices, is forecast to rise to 3.6% in July from 3.5% in June. More importantly, FOMC Chairman Jerome Powell will give his speech at the Jackson Hole Symposium at 1400 GMT and will argue that the market reaction to the PCE inflation report will likely be short-lived.

Investors will look for new clues as to when the Fed’s cuts in asset purchases will start. At the moment, the markets seem to be priced in with expectations of contraction before the end of the year. If Powell adopts a cautious tone and reassures the markets that the dovish outlook will not change for the rest of the year, the USD could come under strong bearish pressure and trigger a rally in XAU/USD. On the other hand, even if Powell refrains from changing the perception of the policy outlook, the downward trend of the pair may remain limited.

What levels can gold prices see next to yellow week?

According to popular analyst Eren Şengezer, the Relative Strength Index (RSI) indicator on the daily chart continues to move sideways near 50, confirming the indecision of gold in the short term. On the upside, it seems like intermediate resistance has been formed for gold price yellow in the $1,790/93 region (static level, 50-day SMA).

A daily close above this level could open the door for additional gains towards $1,800 (psychological level) and $1,810 (100-day SMA, 200-day SMA) for gold prices, according to Eren Şengezer. On the downside, static supports are located at $1,770, $1,760, and $1,750, according to Eren Şengezer.

Here is next week’s schedule:

Monday
Existing home sales, manufacturing PMI

Tuesday
New home sales

Wednesday
Durable goods orders, Jackson Hole begins.

Thursday
Unemployment claims, GDP Q2

Friday
PCE price index, Fed Chairman Powell scheduled to speak in Jackson Hole.


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Michael Lewis

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