Gold weekly forecast: Biased higher but not rushing to test the theory

Gold has shown no major relationship with traditional drivers such as the US dollar and bond yields recently
The economic data calendar is quiet next week
Headline risk and technicals may dictate directional moves next week

Geopolitical developments and technicals look set to dominate movements in the gold price next week. With next to no correlation with historic market drivers such as the US dollar and bond yields, and with a quiet data calendar, respecting the price action comes across as good a strategy as any.

Limited known event risk next week

After a fortnight where markets scrutinised every US data release for signs of a looming recession, no matter how spurious the linkage, traders will need to have a fresh plan this week given an eerily quiet data calendar in the US and abroad.

The TradingView calendar below is generous in listing the events below as important, with Canada’s inflation print and fresh flash PMI reports from around the developed world looming as the only potential market movers. And none come across as particularly important for bullion.

While the Jackson Hole central bank symposium could generate volatility given it features several Fed speakers, what can they tell markets beyond what they already know? We know they’re data dependent and guiding for a measured easing cycle beginning in September, should incoming information allow. And the minutes of the Fed’s July meeting already look dated.

For gold, it points to headline risk and technicals being the dominant market drivers. As it’s impossible to predict the former with any accuracy, price signals are what we can focus on to evaluate trade setups when they arrive.

Gold slowly grinding towards record highs

Gold is grinding higher on the daily chart, bouncing off uptrend support dating back to late June within a longer ascending channel. The path of least resistance looks higher rather than lower near-term, although you get the sense traders are in no rush to test the theory, refusing to take the opportunity to retest the record highs set in July earlier this week. There’s also no strong signal in momentum with MACD and RSI (14) going nowhere fast.

For now, respecting the existing range looks the best option until the price suggests otherwise. Minor support is found at $2418.40, marginally above the June uptrend located around $2400. $23800 and $2349 are other levels of note. On the topside, a break of the record high may be quickly followed by a push to $2500.

-- Written by David Scutt

Follow David on Twitter @scutty

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