These Data and Levels are Important for Gold Prices Next Week!

• Gold prices closed in negative territory for the third week in a row.
• The hawkish FOMC policy outlook weighed on rising US T-bond yields.
• According to analyst Eren Şengezer, gold prices seem to have formed technical support at $1,740 before $1,730.

After last week’s decline, gold prices recovered and closed in positive territory on Monday and Tuesday. Gold prices lost momentum after hitting their strongest level on Wednesday as the FOMC strengthened with a hawkish policy outlook. Rising U.S. Treasury yields added to the bearish pressure in the second half of the week, and 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?

cryptocoin.com 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 refuge 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.

During Asian trading hours 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 gold prices in the past week!

More importantly, FOMC Chairman Jerome Powell explained that the language in the statement was meant to mark the bar for contraction, that this could be met as soon as possible at the next meeting. Additionally, Jerome Powell said they plan to complete the cut by mid-2022. Commenting on the disappointing August jobs report, the president noted that the weak Non-Farm Payroll reading was due to the spike 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 prices, extending their decline to a 5-week low of $1,737. Meanwhile, the U.S. Department of Labor’s weekly publication showed that Initial Unemployment Claims rose from 335,000 to 351,000. On the last trading day of the week, gold prices made a technical correction towards $1,750.

What developments are important for gold prices next week?

On Monday, August Durable Goods Orders will appear in the US economy, but these data alone are 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 Economic Analysis will release its final forecast for second-quarter Gross Domestic Product (GDP) growth, along with the U.S. Department of Labor’s weekly Initial Unemployment Claims report.

The Core Personal Consumption Spending (PCE) Price Index, the Fed’s preferred gauge of inflation, will be watched for fresh momentum ahead of Friday’s ISM Manufacturing PMI and UoM’s Consumer Sentiment Index data. Meanwhile, investors will be keeping a close eye on the movements of US T-bond yields and overall risk perception. According to Eren Şengezer, 1.5% is aligned as the key resistance for the benchmark 10-year US bond yield, and a break above this level could trigger a rally and lead to another drop in gold prices.

What levels will gold prices test 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 for gold prices (61.8% retracement of the Fibonacci April-June uptrend) could attract buyers. According to Eren Şengezer, gold prices could target $1,790 (20-day SMA, 50-day SMA) before $1,800 (psychological level) and $1,805.

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