GLDI - Gold: Summer Doldrums

2023-08-13 07:57:37 ET

Summary

• Gold prices declined this week due to inflation data and expectations of the Federal Reserve's short-term policy.
• Traders reduced their gold positions in anticipation of a stronger US Dollar and increasing US Treasury yields.
• The upcoming week's direction for gold prices remains uncertain, with no significant data releases expected.

Fundamentals:

Over the past five trading days, our focus has been on market news, economic indicators, and significant headlines influencing gold prices and related assets, which might continue to play a role moving forward.

This week saw a decline in gold prices, driven mainly by inflation data, which hints at potential future decisions by the FOMC. A notable event this week was the release of US consumer inflation data for July, causing gold prices to dip. Even though the market had somewhat anticipated the CPI report, gold prices steadily decreased throughout the week. This decline was due to expectations regarding the Bureau of Labor Statistics' data and its potential implications on the Federal Reserve's short-term policy.

Two main factors influenced gold's valuation outlook. Firstly, the constant rate of inflation means the FOMC might maintain its approach of hiking rates through 2023, signaling that while their strategy is effective, it's not complete. Secondly, without signs of inflation increasing again, gold wouldn't benefit as an inflation shield. Consequently, traders reduced their gold positions, with many anticipating a stronger US Dollar and increasing US Treasury yields.

The released data on Thursday mostly aligned with the consensus, even though the CPI and "Core CPI" were slightly below expectations. Despite this, the US Dollar and bond yields strengthened. Gold prices saw a significant sell-off, settling just above $1910/oz. It's worth noting that gold's stable price during this time suggests that the market had already considered the July inflation data earlier in the week. There were some hopes in the US equities market that the slightly lower CPI might influence the FOMC's decisions at the Jackson Hole Symposium, but these expectations were weak.

On Friday, gold prices showed slight improvement, reaching up to $1963/oz, but another set of inflation data affected its momentum. However, the consistent support for gold at $1942/oz offers a silver lining.

Looking ahead, the upcoming week's direction remains uncertain due to mid-August's typical quietness. No significant data releases are expected, except for the awaited FOMC minutes on Wednesday.

In conclusion, traders should enjoy their weekends and return next week for another comprehensive market review.

Let's take a look at the weekly standard deviation report posted in the Marketplace section under Mean Reversion Trading and see what trading opportunities we can identify short-term.

Gold: Weekly Standard Deviation Report

Aug. 12, 2023 12:53 PM ET

Summary

• Gold futures contract closed below key indicators, confirming bearish trend momentum for the week.
• The market's close below the VC Weekly Price Momentum Indicator supports the current bearish price momentum.
• Short positions can be capitalized on during price corrections, while long positions should consider using the 1932 level as a Stop close only.

Weekly Trend Momentum:

The gold futures contract concluded at a price of 1946. Notably, the market's close below the 9-day Simple Moving Average ((SMA)) of 1993 is an affirmation of a bearish trend momentum for the week. Any subsequent closure above this 9-day SMA would transition the short-term bearish trend to a neutral position.

Weekly Price Momentum:

The market's close below the VC Weekly Price Momentum Indicator, set at 1957, further corroborates the prevailing bearish price momentum. A closure surpassing the VC PMI would neutralize the present bearish short-term trend.

Weekly Price Indicator:

Investors might consider capitalizing on short positions during price corrections observed between the Buy 1 and 2 levels, specifically at the 1932 - 1918 range. Conversely, for those leaning towards long positions, it is advisable to employ the 1918 level as a Stop Close Only, operating under a Good Till Cancelled order paradigm. Anticipate taking profits on long positions upon reaching the Sell 1 and 2 thresholds, identified at the 1972 - 1996 range, within the week.

Cycle Analysis:

The forthcoming cycle is scheduled for 8.15.23.

Strategy:

For those currently holding short positions, it might be prudent to target profits within the 1932 - 1918 range.

Thank you for your attention, and we shall continuously monitor market fluctuations to provide timely updates. For any further assistance, please feel free to contact us.

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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