All Eyes On Important US Data - RSBL

Last week gold witnessed a series of whipsaws as traders are being dependent on US data releases. Gold swung into action in the range of 1900-1950 $.

Gold was little changed on Monday as investors awaited U.S. inflation data that could influence the Federal Reserve’s policy stance, 

The Labor Department’s employment report on Friday showed the U.S. economy added the fewest jobs in 2-1/2 years in June, but persistently strong wage growth pointed to still-tight labour market conditions.

Bullion prices have dropped more than 7% since reaching near-record levels in early May as investors scaled back expectations of an end to the Fed’s rate-hiking cycle.

Gold prices edged higher on Tuesday as the dollar and bond yields fell ahead of U.S. inflation data that could offer more cues on the Federal Reserve’s rate-hike path.

Longer-dated U.S. Treasury yields fell on Tuesday as investors awaited Wednesday's inflation data for further clues on whether price pressures are abating and if the Fed is closer to the end of its rate-hiking cycle.

Sticky inflation is widely expected to attract more rate hikes from the Fed, with the central bank set to raise rates by at least 25 basis points in an end-July meeting.

Higher interest rates dull the appeal of gold, which pays no interest

Recent comments from Fed officials reiterated that while the central bank was close to reaching its peak interest rates, interest rates will still rise in the near-term. U.S. rates are also expected to remain higher for longer.

While the prospect of an eventual end to the Fed’s rate hike cycle buoyed gold, higher-for-longer rates are expected to keep any further gains in the yellow metal limited, given that they increase the opportunity cost of holding bullion.

We favour the downside in gold and silver, but suggest traders avoid selling palladium. However, the control of the precious metal markets sits with outside markets, with the dominating force determined by which market (dollar or US interest rates) exhibits the biggest price moves.

The focus this week will be on U.S. CPI (Consumer Price Index) data due on Wednesday after last week’s Fed minutes showed a vast majority of the policymakers expected further policy tightening.There is a massive eye on tomorrow's inflation data - it comes too late in the day for the July meeting. That hike is basically sealed and it would take something pretty weak on the inflation side to change that.

Some Turbulence Expected Soon - RSBL

 The week opened on a slightly negative band for gold, as prices fell on Monday, sticking to a tight trading range seen over the past three weeks as markets turned cautious ahead of upcoming U.S. consumer inflation data and a Federal Reserve meeting.

Last week gold was supported by soft labour data. This pushed gold prices a bit over expectations that the Fed will skip a gold rate hike at the conclusion of a two-day meeting on Wednesday.

There is a lot of geopolitical and economic uncertainty occurring globally. 

The ongoing Ukraine crisis, Fed's economic uncertainty and financial crisis has led to a lot of volatility in the market. It has pushed gold into a tight trading range. 

Gold prices have stuck to a trading range of between $1,930 and $2,000 an ounce over the past three weeks, with uncertainty over the economy and monetary policy offering little cues for a breakout.

Gold stands to benefit from any potential pause by the Fed, and is expected to see increased safe haven demand as global economic conditions worsen this year. But given that U.S. interest rates are likely to remain higher for longer, upside in the yellow metal may be limited as returns on debt appear more attractive.

Rising interest rates had battered gold prices through 2022, as the Fed enacted its most aggressive pace of monetary tightening since the 2008 financial crisis. But the prospect of a pause in 2023 has kept gold upbeat so far this year.

While we will not argue against an upside follow-through in gold and silver prices,we still think the markets lack solid and sustainable bullish fundamental themes.

While we see the PGM markets continuing to slide, we see gold weakening but remaining capable of respecting consolidation support at $1,950. Silver on the other hand has a very strong chart set up and could be separating from financial market related fundamentals and in turn may be shifting toward factoring tight supply and hope for tech related demand improvement. However, both gold and silver should expect turbulence in the coming 3 sessions with global inflation readings and a US Fed rate decision scheduled for Wednesday afternoon. Uptrend channel support in July silver is far below the trade today down at $23.91 with closer in pivot point support seen at $24.32. As indicated already we see August gold remaining within a $1950 and $2000 trading range, but chart support is likely to be enhanced by weakness in the dollar.

Sentiment in the gold market remains bullish as momentum supports higher prices but analysts are warning investors that they should not expect prices to break above $2,000 an ounce next week as the Federal Reserve looks to maintain its hawkish monetary policy stance even as it leaves rates unchanged.

However, signs of a softening US jobs market should provide for ongoing declines in the dollar and ongoing declines in US treasury yields which are probably capable of pushing gold back up into consolidation resistance at $2001.