Gold prices rose above its 100-DMA as anticipated here (Macro Scan) on a weak payrolls report. The metal currently trades around USD 1150/Oz levels; few pips above its 100-DMA located at USD 1143.28/OZ levels
Daily chart
The chart clearly tells us that the metal has repeatedly failed to sustain above its 100-DMA since early March 2015.
Each time it failed to sustain, the metal easily suffered $40-$60 loss.
This time it is different..
Symmetrical Triangle Breakout, Falling Trendline Breached
On the daily chart, we have an upside breakout from the symmetrical triangle.
The prices have also breached the downtrend (black line in the chart). No such bullish development existed on the charts in the numerous occasions witnessed since early March.
Fed unlikely to hike rates (25 bps) any time soon
More importantly, the 2015 Fed rate hike bets are almost non-existent now. A report published t June end here (Macro Scan ) said the Fed could hike rates by 25 basis points in September or at least provide a hint of a similar move in December. However, neither the Fed hiked rates nor did it commit to any such move. In my opinion, that was an opportunity lost and we are unlikely to see rate hike (25 bps) happening any time soon, not even in 2016.
A 5 bps or 10bps or 15 bps rate hike will be as good as no rate hike and thus, may not have any impact on the metal. Every now and then, the Fed policymakers may hit the wires and try to talk up rate hike bets. However, all talk and no walk will slowly reduce the marginal efficiency (pushing up rate hike bets) of the talk as well.
Another round of currency wars ahead
This also means that we are in for another round of currency wars. No Fed rate hike also means no BOE rate hike and more aggressive action from other central bankers. Currency debasement can only add to the yellow metal’s strength.
Hedge/Safe haven demand
And lastly, as discussed here (Macro Scan ), the yellow metal has already priced-in deflation (Sep 2011-August 2015 drop), while the stock markets are yet to do so. With global growth looking increasingly weak and little scope for a rally in commodity prices, the stocks could head lower and increase hedge/haven demand for Gold.
Gold Eyes monthly 100-MA
Thus, gold prices could rally to USD 1200/Oz in the near term and extend gains to USD 1241.86 (weekly 100-MA) – USD 1260.00 (falling channel resistance on the monthly chart). Prices may trade sideways in $20 range in the short-term, but overall appear heading towards USD 1200/Oz.
On the downside, only a break below USD 1100/OZ could turn the outlook bearish.
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