Attention To These Developments And Dates For Gold Prices Next Week!

Gold started August solidly. It rallied to $1,800 before wiping out some of its weekly gains on Friday. According to market analyst Eren Sengezer, the sharp decline in US Treasury bond yields and the weak performance of the dollar allowed gold to gain more than 1% in the first half of the week. However, after the impressive July jobs report from the US, gold prices reversed their direction.

Dance of the US dollar with gold prices

Dollar sales continued at the beginning of the week. The US Dollar Index (DXY) fell to its weakest level in nearly a month, below 106.00. Data released by the ISM on Monday showed the Manufacturing PMI survey’s Price Paid Index fell to 60 in July from 78.5 in June. It also revealed a significant softening in price pressures. Investors reduced their Fed rate hike forecasts by 75 basis points (bps) in September, based on these data. Gold prices closed in positive territory for the fourth consecutive day.

But as safe-haven flows began to dominate financial markets, the dollar regained its strength. It did not allow gold to maintain its bullish momentum. News that Speaker of the US House of Representatives Nancy Pelosi is planning to visit Taiwan despite strong warnings from China prompted markets to be risk-averse on Tuesday. Additionally, hawkish comments from Fed officials helped the USD continue to outperform its rivals.

The Fed has faltered; Nancy Pelosi has landed in Taiwan

Chicago Fed President Charles Evans said a 50 basis point rate hike would be a “reasonable consideration” for the September meeting. But it left the door open for a 75 basis point gain. Also, St. Louis Federal Reserve Bank President James Bullard said he wants to lower the policy rate to the 3.75-4% range by the end of this year. San Francisco Fed President May Daly argued that markets are overplaying themselves in anticipation of rate cuts next year.

However, investors breathed a sigh of relief after Pelosi landed in Taiwan and the dollar’s recovery eroded midweek strength. ISM Services PMI rose from 55.3 in June to 56.7 in July. However, the dollar held back as the Price Paid Index fell to 72.3 from 80.1, compared to market expectations of 81.6.

BOE raises interest rates by 50 basis points

cryptocoin.comAs you followed on Thursday, gold prices gathered more upward momentum amid falling global bond yields. After the August policy meeting, the Bank of England (BOE) increased the policy rate by 50 basis points to 1.75%, as expected. The bank said in an alarming note that now the UK economy will enter recession in the last quarter of the year. He also noted that he predicts it will continue to contract through 2023. XAU/GBP gained more than 1% on a daily basis on Thursday, indicating that gold demand remains strong.

NFP data beat expectations, golden U-turn

The U.S. Bureau of Labor Statistics announced on Friday that Nonfarm Employment in the U.S. rose 528,000 in July. The data far exceeded the market estimate of 250,000. The basic details of the report showed that the Unemployment Rate fell to 3.5%. It also revealed that annual wage inflation, as measured by Average Hourly Earnings, remained stable at 5.2%. The 10-year US Treasury bond yield rose more than 5% after these data, reaching over 2.8%. This caused gold to make a sharp U-turn ahead of the weekend.

“Low demand in China puts pressure on gold”

China Trade Balance data will be watched closely by market participants at the beginning of the week. According to the analyst, if there is a larger-than-expected drop in the trade surplus, gold is likely to struggle to gather strength. On the other hand, the opposite is also true. In this context, the analyst says that since the beginning of summer, disappointing data from China has put pressure on gold prices due to its potential negative effects on the demand outlook.

Focus for gold prices: US CPI data

On Wednesday, the U.S. Bureau of Labor Statistics will release the Consumer Price Index (CPI) figures for July. On an annual basis, CPI is expected to fall to 8.9% from 9.1% in June. According to the analyst, a higher-than-expected CPI data is likely to trigger a dollar rally.

The extent of the Fed’s rate hike in September is likely to have a significant impact on the market price, the inflation report says. Currently, the FedWatch Tool gives a 66.5% probability of a 75 basis point rate hike by the Fed. Fed officials are reluctant to outright reject such a rate move. So it’s possible that a CPI data of over 9% could cause hawkish Fed bets to dominate market action. It is also likely to allow it to increase the bearish pressure on gold prices.

On Friday, the University of Michigan will release its flash Consumer Sentiment Index for the month of August. Investors will pay attention to the long-term inflation expectations component of the survey rather than the headline confidence data. In the last version of July, long-term inflation expectations were at 2.8%. Any data above 3% is likely to help strengthen the dollar and hurt gold. On the other hand, data of 2.8% or lower is likely to weigh on the dollar.

Gold prices technical view

Market analyst Eren Sengezer draws the technical picture of gold as follows. The Relative Strength Index (RSI) indicator on the daily chart dropped to 50 on Friday. This signaled a loss of bullish momentum. Gold is trading below $1,780. Here the 23.6% retracement of the Fibonacci latest downtrend and the descending trendline meet.

Technically, gold needs to confirm this level as support to continue its rise. In this scenario, $1,800 and $1,830 are aligned as next bullish targets. On the downside, an initial support is located at $1,700 and $1,740 before $1,680.

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