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.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD: Federal Reserve and Nonfarm Payrolls spell action this week
The EUR/USD pair temporarily reconquered the 1.0700 threshold last week, settling at around that round level. The US Dollar lost its appeal following discouraging United States macroeconomic data indicating tepid growth and persistent inflationary pressures.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold: Strength of $2,300 support is an encouraging sign for bulls
Gold price started last week under heavy bearish pressure and registered its largest one-day loss of the year on Monday. The pair managed to stage a rebound in the second half of the week but closed in negative territory.
Ethereum fees drops to lowest level since October, ETH sustains above $3,200
Ethereum’s high transaction fees has been a sticky issue for the blockchain in the past. This led to Layer 2 chains and scaling solutions developing alternatives for users looking to transact at a lower cost.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.