Gold set to rise for third week
Fawad Razaqzada July 28, 2017 12:28 PM
As we approach the end of another exciting week in the markets, gold is finding itself at levels not seen since mid-June. At a good $1268 per troy ounce, the yellow metal is now up for the third straight week, having managed to recoup about three quarters of the losses it had suffered when it fell from $1295 at the start of last month. The dollar-denominated commodity is supported above all by ongoing weakness in US dollar. It has been held back by the still positive sentiment on Wall Street, where the Dow has hit a new record high despite yesterday’s sharp sell-off in some technology names. Had it not been for the rising US stock prices, gold would surely have found itself much higher by now given the extent of the dollar’s decline.
The greenback fell again today, most notably against the euro and yen. News of a pickup in the rate of US economic growth in the second quarter was offset by softer wage growth and inflationary pressures. Today’s US macro pointers weren’t disastrous by any means. But on balance they weren’t what the dollar bulls wanted to see, underscoring the struggles the world’s largest economy has faced in recent months. They better hope that next week brings them better fortune.
US GDP grew by an above-forecast 2.6% in Q2 on an annualized format, which was better than 2.5% expected. There was an upward revision to Q1 GDP too, from 0.7% to 1.4%. However, the so-called GDP price and employment cost indices both rose by weaker-than-expected 1.0 and 0.5 per cent respectively. What’s more, the revised University of Michigan Inflation Expectations eased to 2.6% from 2.7% previously.
It is going to be an extremely busy week for the economic calendar next week, and not just in the US. Key data from China, Eurozone, UK and US will dominate the agenda, not to mention New Zealand or Canada. In the US, it will be Friday’s employment figures that will probably cause the most reaction in the markets. In addition, there will be two major central bank policy decisions from the Bank of England and the Reserve Bank of Australia. On top of all this, there will be more corporate earnings to look forward, for example from Apple and HSBC. So, there will be something for everyone next week.
But as far as gold is concerned, it continues to break key resistance levels and so far there’s not a lot the bears can latch onto. That double top formation at $1295 is looking increasingly like a ploy to trap the sellers. I reckon there is a cluster of buy stop orders resting above that $1295 area and that these orders may attract the price of gold towards it, leading to an eventual breakout – similar for example to how the EUR/USD approached and then breached its own key level at 1.1710 this week.
Source: eSignal and FOREX.com.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.