Jump to content

Gold price weakness to persist on failure to defend August opening range


Recommended Posts

The price of gold struggles to hold above the 50-Day SMA as it gives back the advance from last week, and the precious metal may continue to track the negative slope in the moving average if it fails to defend the monthly low.

Source: Bloomberg

The price of gold appears to be reversing ahead of the monthly high ($1808) even as US Treasury yields remain under pressure, and the precious metal may threaten the opening range for August as it snaps the series of higher highs and lows from last week.

1660618471634.pngSource: DailyFX

It remains to be seen if the Federal Open Market Committee (FOMC) Minutes will influence the price of gold as the slowdown in the US Consumer Price Index (CPI) dampens bets for another 75bp rate hike, but hints of a looming shift in the Fed’s approach for combating inflation may prop up the precious metal as the central bank appears to be on track to winddown its hiking-cycle over the coming months.

As a result, the statement may foreshadow a shift in the Fed’s forward guidance if a growing number of officials show a greater willingness to implement smaller rate hikes, and the price of gold may stage a larger recovery ahead of the next interest rate decision on September 21 as it trades above the 50-Day SMA ($1780) for the first time since April.

However, more of the same from the FOMC may drag on the price of gold as Chairman Jerome Powell acknowledges that “another unusually large increase could be appropriate at our next meeting,” and the rebound from the yearly low ($1681) may turn out to be a near-term correction as the moving average continues to reflect a negative slope.

With that said, the price of gold may continue to track the negative slope in the moving average with the FOMC on track to carry out a restrictive policy, and the weakness in the precious metal may persist if it fails to defend the opening range for August.

Gold price daily chart

1660618513846.pngSource: TradingView


  • Unlike the price action in June, gold managed to trade above the 50-Day SMA ($1780) earlier this month, with a break/close above the $1816 (61.8% expansion) region bringing the $1825 (23.6% expansion) to $1829 (38.2% retracement) region on the radar, however, the price of gold may continue to track the negative slope in the moving average as it appears to be reversing ahead of the monthly high ($1808), and failure to hold above the Fibonacci overlap around $1761 (78.6% expansion) to $1771 (23.6% retracement) may lead to a test of the monthly low ($1754).
  • Lack of momentum to defend the opening range for August may push the price of gold back towards $1725 (38.2% retracement) area, with the next area of interest coming in around $1690 (61.8% retracement) to $1695 (61.8% expansion).

David Song | Analyst, DailyFX, New York City
16 August 2022

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
    • Total Posts
    • Total Members
    • Most Online
      10/06/21 10:53

    Newest Member
    Joined 03/06/23 20:25
  • Posts

    • I don't know but it looks like a really awesome service Because I have come across all sorts of mixers in my work  
    • Charting the Markets: 2 June Indices rally as US agrees debt ceiling bill. EUR/USD, GBP/USD rally while EUR/GBP stabilises as US debt ceiling bill is passed. And WTI recoups recent losses while gold, silver on track for first weekly advance. Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Friday 02 June 2023               This is here for you to catch up but if you have any ideas on markets or events you want us to relay to the TV team we’re more than happy to.
    • It was a blockbuster number yesterday for the ADP private payrolls, showing 278,000 jobs opened in May, while forecasts had been for 170,000.  Jeremy Naylor | Analyst, London | Publication date: Friday 02 June 2023 IGTV’s Jeremy Naylor suggests a similar upside surprise could see almost 300,000 jobs created under the non-farm payroll count with estimates for 190,000 job creations. The unemployment rate is seen rising one notch to 3.5%. (Video Transcript) NPFs: what to expect Could yesterday's strong private payrolls number from the ADP reading give us an insight into the potential upside risk to today's non-farm payrolls? That report from ADP yesterday showed 278,000 jobs opened in May - forecasts had been for 170,000. Now the NFP expectations, 190,000 job creations are forecast for the month of May proportionately using that ADP surprise. That would mean an upside reading for NFPs close to 300,000. Why the increase? Now, the unemployment rate is seen rising one notch to 3.5%. Why is that rising? When you've got that rise in the number of job creations, the unemployment rate is not taking the same data that the jobs numbers themselves are being produced from average hourly earnings. We're looking there for that to go up 0.3% month-on-month, 4.4% year-on-year, still below the rate of inflation. Now, this chart shows the unemployment rate back to pre-Covid-19 levels. It's clear that jobs have been created at an appreciable rate and this alongside a relatively strong GDP number and inflation coming down, there may yet be a soft landing for the US economy. But if the Federal Reserve (Fed) does continue to raise rates, things may get a little bit more sticky for the economy and a little bit more difficult to predict. This is a comparison of fed funds rates and US consumer price inflation (CPI) since January 2021. So you can see here the rate at which the US central bank has been piling the pressure on the monetary markets with that rise to five and a quarter percent. And at the same time, the CPI number is coming down, which is a good thing, but it's still not down to the 2% level, 4.9% is a long way away still from the 2% target. So the Fed is entitled still to have an excuse to raise interest rates. US dollar basket Let's take a look at what's been happening with the US dollar basket. Yesterday, we saw a pullback coming through as we saw money going into risk assets because of that rubber stamping from the Senate or the vote in the Senate to approve the budget that's now gone for the presidential seal. EUR/USD And we've seen a second day in a row of losses or the euro for the dollar basket as far as the euro/dollar is concerned, bouncing away from that 76.4% retracement. And I think now, you will have been stopped out if you were short on this, you would have been stopped out on this and hopefully you would have got some profits on the way down. So that's where things are ahead of non-farm payrolls out today at 13:30 UK time. And we will be live on the IG platform at 13:25 today.
  • Create New...