- Gold prices struggled to recover after falling below key technical levels.
- Risk-off flows helped the USD gain strength throughout the week.
- According to popular analyst Eren Şengezer, investors are waiting for US CPI data before the Fed’s policy decisions on September 22.
Gold prices started the new week calmly and consolidated the previous week’s gains on Monday. Trading volumes returned to normal levels after the Labor Day holiday in the US, while XAU/USD turned south and lost 1.6% on Tuesday as the risk-averse market environment helped the dollar find demand. Although the pair managed to erase some of its losses on Thursday, it closed the week below $1,800 and lost about 2%.
What happened in the gold market last week?
Data released from China on Tuesday revealed that Exports rose 25.6% year-on-year in August, compared to the market expectation of 17.1%. In addition, Eurostat reported that the Gross Domestic Product (GDP) in the Euro Area grew by 2.2% QoQ in the second quarter, improving analysts’ forecast of 0.6% contraction. But despite these optimistic data releases, the market mood deteriorated and major global stock indexes reported losses. In contrast, the US Dollar Index (DXY) rose 0.35%, forcing XAU/USD to decline.
On Wednesday, the U.S. Bureau of Labor Statistics announced that JOLT Open Jobs had reached a new series of 10.9 million in July. On a negative note, the IBD/TIPP Economic Optimism Index fell from 53.6 in August to 48.5 in September, its lowest level in 2021. These numbers did not affect market sentiment and the USD remained strong against its main rivals. In a statement after its September policy meeting, the European Central Bank (ECB) stated that favorable financing conditions could be maintained by a moderate reduction in Pandemic Emergency Purchase Program (PEPP) purchases.
Gold prices made a bad weekly close…
The market’s initial reaction to this hawkish direction was the rise of the EUR/USD pair and the modest selling pressure surrounding the dollar paved the way for a recovery in XAU/USD. Still, ECB President Christine Lagarde explained that this decision was a correction rather than a decrease, and limited the upward movement of EUR/USD. Meanwhile, the US Department of Labor’s weekly publication showed that Initial Unemployment Claims fell to 310,000, the lowest level since the start of the pandemic.
cryptocoin.com As previously reported, before the weekend, investors largely ignored the data that revealed the Producer Price Index (PPI) for final demand from the US rose to 8.3% year-on-year in August from 7.8% in July. came. After starting the last day of the week in positive territory, Wall Street’s major indexes have turned south and DXY has rallied, causing XAU/USD to close near the lower end of its weekly range.
What events will affect gold prices next week?
The first high-impact data of the week will be the Consumer Price Index (CPI) report coming from the US on Tuesday. Loretta Mester, Chairman of the Federal Reserve Bank of Cleveland, said on Friday that she sees upside risks to the inflation forecast and voiced her support for the contraction to begin before the end of the year. On a similar note, Atlanta Federal Reserve Chairman Raphael Bostic noted that contraction at some point this year would be appropriate.
A stronger-than-expected CPI reading could cause investors to start pricing in a decline in the Fed’s asset purchases, causing the USD to rise, and vice versa. On Wednesday, the Chinese Industrial Production and Retail Sales figures will be looked at to give new impetus. However, the quiet market response to the latest trade data from China suggests that the impact of these readings on market sentiment will remain limited. Retail Sales and the Philadelphia Fed Manufacturing Survey will feature in the U.S. economic report on Thursday ahead of the University of Michigan’s preliminary Consumer Sentiment Index data on Friday.
What levels can gold prices see next week?
After the decline seen in the first half of the week, according to Eren Şengezer, the short-term technical outlook of gold seems to have turned to neutral with a bearish bias. In addition to the fact that XAU/USD closed below both the 100-day and 200-day SMAs for the fourth consecutive day on Friday, the Relative Strength Index (RSI) indicator on the daily chart fell below 50, according to Eren Şengezer.
On the downside, according to Eren Şengezer, initial support for gold prices is at $1,790, where the 38.2% retracement of the Fibonacci latest uptrend. A daily close below this level could open the door for additional losses towards $1,780 (static level, Fibonacci 50% retracement) and $1,760 (static level) for gold prices, according to Eren Şengezer. Initial resistance could be seen in the $1,800 region (psychological level, 50-day SMA, Fibonacci 23.6% retracement) ahead of $1,810 (200-days SMA) and $1,815 (100-days SMA) for gold prices, according to Eren Şengezer.
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