Youtrading UK
Português Español русский
Register Login
  • Markets
  • Charts
  • Economic Calendar
  • World
  • Economy
  • Insights
  • About Us
No Result
View All Result
Youtrading UK
  • Markets
  • Charts
  • Economic Calendar
  • World
  • Economy
  • Insights
  • About Us
No Result
View All Result
Youtrading UK
No Result
View All Result

Gold set for best week in two months, what next for the precious metal?

by Joel Frank
30 July 2021
in Commodities
0
Gold set for best week in two months, what next for the precious metal?

Photo by Zlaťáky.cz.

355
SHARES
8.1k
VIEWS
Share on FacebookShare on TwitterShare on WhatsApp

Spot gold (XAUUSD) prices are on course to post their best weekly performance in over two months, with XAUUSD looking to close the week with gains of about 1.5% near the $1830 level, having started the week closer to the $1800 level and even at one point been as low as $1792. The precious metal had spent much of the week meandering around the $1800 level in anticipation of the FOMC rate decision on Wednesday, with a persistently strong bid in the US dollar prior to the important central banking event preventing gold prices from taking advantage of a fall in US real yields to fresh record lows.

However, with the FOMC out of the way, the US dollar bears got the green light to jump in and push the buck lower. The Dollar Index (DXY) is down about 0.75% versus its pre-FOMC levels above 92.50, not so much because there was anything dovish from the Fed, but more because, amid the fall in US real yields in the proceeding session, the opportunity cost of holding USDs had risen, but had not yet been reflected in the price. With the DXY now down under the 92.00 level, it appears that the dollar is finally reflecting this drop in US real yields. This has unsurprisingly proven a bullish combination for gold; 1) gold prices are inversely related to USD, given when UDS appreciates, it makes dollar-denominated gold more expensive for international purchase, 2) gold prices are inversely correlated to US real yields because as they fall, the opportunity cost of holding non-yielding gold goes down. With the DXY on course for losses on the week of over 1.0% and US 10-year TIPS yields (this is the inflation expectation adjusted yield on the US 10-year bond) down about 10bps on the week to record lows under -1.15%, it’s no surprise gold is up about 1.5%.

Perhaps the real surprise is that gold has not moved even higher given the size of the moves in the dollar and real yields this week. One explanation could be the fact that XAUUSD has run into some pretty strong levels of resistance yesterday and today in the form of the earlier July high at $1834 and the 50DMA at $1830. This area of resistance marks the top of the $1790 to $1830ish range that spot gold prices have spent most of the month within. Technicians might be inclined to take the fact that spot gold prices have failed to break above this range as a bearish sign heading into August.

Another explanation could be the fact that, though some upside in gold to reflect short-term movement in real yields and the US dollar might be justified, investors may be reluctant to pile into long gold positions with more conviction given their economic/macro-outlook. Though this week saw some turmoil in Chinese financial markets and though questions still linger about a slowdown in growth in China, a reduction in fears about the economic impact of the spread of the delta variant in highly vaccinated developed countries (such as the UK, US and EU) is seemingly keeping confidence in the prospect of a continued economic recovery in developed economies elevated.

Indeed, the message from the Fed this week certainly was not a dovish one; the bank’s view on the economy as portrayed in the new statement on monetary policy and in Chairman Powell’s press conference became, as expected, incrementally more hawkish to reflect the progress towards the Fed’s monetary policy goals since its last meeting in June. On the face of it, the tone of the FOMC on the economy and the implication that an official announcement of the bank’s plan to begin tapering its QE programme is approaching does not at all justify the “dovish” market reaction (which includes upside in gold) that has been seen in over the past two days.

In an environment where the US economy is continuing to make solid progress towards the Fed’s dual mandate goals (actually, the inflation goal has been more than already met, but employment levels are still some ways below pre-pandemic levels), it is perhaps not surprising to see gold prices struggle to rally with as much conviction as the bulls might like. Indeed, continued US economic recovery and eventual monetary policy tightening ought eventually to lead to higher nominal and real US bond yields, which is bearish for gold, and is likely to also push the USD higher (also bearish for gold) if the US economy is outperforming other major developed market economies like the Eurozone and Japan (which it is very much expected to do) and the Fed is subsequently tightening monetary policy at a faster rate than them.

In terms of what this all means for the near-term outlook for spot gold prices; the above environment comes into fruition, this suggests gold prices may continue to post lower highs and lower lows as it fluctuates over the coming months, as has been the case for the most part since this time last year. But in the short-medium term, gold traders will need to keep their eyes firmly pinned on what is happening to the DXY and with US real and nominal yields to derive intra-day/week direction.

Tags: FOMCGOLD
Previous Post

GBPAUD breakout trade

Next Post

US dollar rises on Chicago PMI data release, with profit taking and month end rebalancing ensuing.

Next Post
The US dollar makes 3 months low

US dollar rises on Chicago PMI data release, with profit taking and month end rebalancing ensuing.

CALL US

Categories
  • Commodities
  • Economy
  • Forex
  • Index
  • Insights
  • Markets
  • Opening of the Week
  • Sem categoria
  • Stocks
  • World

Site Map

  • Home
  • Markets
  • Charts
  • Economic Calendar
  • World
  • Economy
  • Insights
  • About Us
Português Español русский

A comprehensive website for traders, both experienced and new! Checkout our content and learn how to invest and speculate in the markets using margin traded products. Our team of educators has extensive experience and is here to help. Enjoy!

Follow us on social media

Risk Warning

All financial products traded on margin carry a high degree of risk to your capital. They are not suited to all investors, please ensure that you fully understand the risks involved, and seek independent advice if necessary.

All Rights Reserved - YouTrading UK 2020

Privacy Policy and Terms and Conditions
  • Home
  • My Academy
    • Register Now
    • Login
  • Markets
    • Opening of the Week
    • Stocks
    • Commodities
    • Forex
    • Index
  • Charts
  • Economic Calendar
  • Economy
  • World
  • Insights
  • About Us
No Result
View All Result

© 2020 YouTrading UK - Leaders in Trader Training.

We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept”, you consent to the use of ALL the cookies.
Do not sell my personal information.
Cookie settingsACCEPT
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
__cfduid1 monthThe cookie is used by cdn services like CloudFare to identify individual clients behind a shared IP address and apply security settings on a per-client basis. It does not correspond to any user ID in the web application and does not store any personally identifiable information.
_wpfuuid11 yearsThis cookie is used by the WPForms WordPress plugin. The cookie is used to allows the paid version of the plugin to connect entries by the same user and is used for some additional features like the Form Abandonment addon.
cf_use_obThis cookie is set by the provider Cloudflare content delivery network. This cookie is used for determining whether it should continue serving "Always Online" until the cookie expires.
cookielawinfo-checbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-advertisement1 yearThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Advertisement".
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
CookieDurationDescription
YSCsessionThis cookies is set by Youtube and is used to track the views of embedded videos.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
CookieDurationDescription
_ga2 yearsThis cookie is installed by Google Analytics. The cookie is used to calculate visitor, session, campaign data and keep track of site usage for the site's analytics report. The cookies store information anonymously and assign a randomly generated number to identify unique visitors.
_gid1 dayThis cookie is installed by Google Analytics. The cookie is used to store information of how visitors use a website and helps in creating an analytics report of how the website is doing. The data collected including the number visitors, the source where they have come from, and the pages visted in an anonymous form.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
CookieDurationDescription
_fbp3 monthsThis cookie is set by Facebook to deliver advertisement when they are on Facebook or a digital platform powered by Facebook advertising after visiting this website.
fr3 monthsThe cookie is set by Facebook to show relevant advertisments to the users and measure and improve the advertisements. The cookie also tracks the behavior of the user across the web on sites that have Facebook pixel or Facebook social plugin.
IDE1 year 24 daysUsed by Google DoubleClick and stores information about how the user uses the website and any other advertisement before visiting the website. This is used to present users with ads that are relevant to them according to the user profile.
test_cookie15 minutesThis cookie is set by doubleclick.net. The purpose of the cookie is to determine if the user's browser supports cookies.
VISITOR_INFO1_LIVE5 months 27 daysThis cookie is set by Youtube. Used to track the information of the embedded YouTube videos on a website.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
CookieDurationDescription
_gat_UA-42160853-21 minuteNo description
cf_ob_infoNo description
CONSENT16 years 8 months 3 days 6 hours 2 minutesNo description
SAVE & ACCEPT
Powered by CookieYes Logo