Gold Weekly Analysis: All eyes will be on FOMC and NFP The big picture for gold is mixed as the bullish trend appears to remain on hold. However, a descending triangle formation shows that some bearish potential may be brewing with Gold markets, and US rates continue climbing at a higher rate than treasuries.
The Fed's next meeting will decide whether or not they're hawkish enough to elicit more significant responses from gold investors who want less risk associated with their investment portfolios. What will happen then could have wide-ranging impacts on the gold price.
Gold may continue to perform well in a stagflation-like environment. When you have strong inflation and meager growth, similar to last week's Advance GDP read showing 2% annualized growth rate for next year's economy whether market forecasted 2.6% growth.
But we're not there yet, so it depends on how the Fed handles the problematic situation, which has begun to build up over time. The Federal Reserve will be giving its insights into these matters this week when they release their assessment at two separate but related events: Jackson Hole Conference Monday through Friday, August 6th -10th.
If FED hind any rate-hiking chance next year, we may see gold will drop based on that news. As inflationary exists so, the drop may not be too heavy, but it will fall.
Gold Weekly Chart
In the weekly chart gold price breaks below the descending triangle trend line. In Gold, the fear is rate hikes. Rate hikes can draw capital away from non-interest-bearing assets such as Gold or Silver to potentially more profitable investments that are currently paying interest on their loans from banks and other financial institutions around this country (The U.S).
In recent years, the hawkish speech from the Fed chairman has become when making decisions about rates hike deadlines. It has been shown historically through looking at charts between 2012 - 2015.
We saw our lowest point for gold prices among all others following an increase—a clear indication of what should've happened if one understands how anticipation works within gold markets.
Gold price dropped more than 7500 pips from 2012 to 2015 because of the higher bank rate. Though the situation is not the same as the current situation, higher bank rates harm gold prices if inflation is under control.
But inflationary pressure is the main problem for most countries. So, indeed FED increases their bank rate, it won't hurt much gold price for the long term because the USA is also under inflationary pressure because of a pandemic.
Gold Technical View:
Two key levels are clear as a conclusion to this market. First, the upper range, 1835-1845 resistance, and 1750-1720 support zone have been tested several times in 2021.
So, as long as the gold market with that range, I don't think we will see heavy movement.
From the current gold price, we may see some upward correction nearly the $1800 price zone. But if the market breaks below the immediate support 1770 price zone, our first target to the downside is the $1745/1750 price zone.
And breaking below $1745, our final downside target is a $1720 price zone for the next week until we get enough fundamental reports that will favor the USD.
On the other hand, $1800/1800 is immediate resistance. So, the market may test this price as well. But the swing area is $1815 price zone.
So as long as below $1815, we have hope that gold still has a chance to drop. breaking above $1815, our upside target would be the $1835/1845 price zone.
As long as the market hold below the $1845 price zone, I would suggest not buying gold. However, with the gold price breaking above $1845, our upside target would be near the $1900/1920 price zone.
