GBUG - Gold: A Relief Rally Coming Up

2023-08-07 03:56:58 ET

Summary

• Gold prices rise as weaker-than-expected US jobs report leads to decline in dollar and Treasury yields.
• Weakening dollar makes gold more affordable for holders of other currencies.
• Weekly standard deviation report suggests short-term trading opportunities in gold, with a bearish trend momentum and price momentum.

Fundamentals:

Gold prices increased on Friday, Aug. 4th, following a slightly weaker-than-expected U.S. jobs report , which led to a decline in the dollar and Treasury yields. This provided some relief to bullion, which was on track for its worst week in six. The nonfarm payrolls data showed an increase of 187,000 jobs, below the forecasted gain of 200,000 jobs.

Spot gold rose 0.4% to $1,940.86 per ounce, while U.S. gold futures settled 0.4% higher at $1,976.10. The jobs report suggested that the Federal Reserve might be less likely to raise interest rates, causing bond yields and the dollar to drop, which supported the price of gold.

The weakening dollar made gold more affordable for holders of other currencies. The probability of the Fed leaving rates unchanged at its upcoming meeting also increased.

Gold is sensitive to rising U.S. interest rates, as it increases the opportunity cost of holding non-yielding assets like bullion. However, the moderate weakness in the jobs data indicated that any dips in gold prices over the next few weeks could be seen as buying opportunities.

Meanwhile, spot silver gained 0.1% to $23.58 per ounce, and platinum rose 0.6% to $919.36. Both silver and platinum were heading for their third consecutive weekly loss. Palladium eased 0.1% to $1,256.97 per ounce.

Let's take a look at the weekly standard deviation report and see what short-term trading opportunities we can identify.

Gold: Weekly Standard Deviation Report

Aug. 05, 2023 12:37 PM ET

Summary

• The weekly trend momentum of 1990 is bearish.
• The weekly VC PMI of 1981 is bearish price momentum.
• A close above 1981 stop, negates this bullishness neutral.
• If short, take profits 1950 - 1925.
• Next cycle due date is 8.15.23.

Weekly Trend Momentum:

The gold futures contract concluded at a price of 1976. Notably, the market exhibited a closing below the 9-day Simple Moving Average ((SMA)) at 1990, validating the bearish direction of the weekly trend momentum. A significant shift in market sentiment would occur if the contract experiences a closing price above the 9-day SMA, effectively negating the current weekly bearish short-term trend, leading to a neutral outlook.

Weekly Price Momentum:

Analysis of the Weekly Price Momentum Indicator reveals that the market closed below the VC Weekly Price Momentum Indicator (VC PMI) at 1981, further reinforcing the bearish stance on price momentum. To counter this bearish bias and transition to a neutral standpoint, it is imperative to observe a closing price above the VC PMI.

Weekly Price Indicator:

As part of the recommended strategy, prudent traders are advised to capitalize on short positions during market corrections when the price levels fall within the Buy 1 and 2 thresholds of 1950 - 1925. Simultaneously, traders considering long positions based on a weekly reversal stop should exercise caution and utilize the 1925 level as a Stop Close Only and Good Till Cancelled order. When reaching the Sell 1 and 2 levels within the range of 1950 - 1925 during the week, it is advisable to contemplate taking profits on long positions.

Cycle:

Marking the next cycle due date as 8.15.23, traders should pay close attention to potential market dynamics around this period.

Strategy:

For traders holding short positions, it is prudent to consider booking profits within the specified range of 1950 - 1925.

Disclaimer: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed herein constitutes a solicitation of the purchase or sale of any futures or options contracts. It is for educational purposes only.

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