Fundamental Forecast for Gold: Neutral
- Gold Bouncing from Long Term Trendline
- Gold Prices Remain at Risk for Weakness
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Gold prices are lower for a sixth consecutive week with the precious metal down 0.36% to trade at 1095 ahead of the New York close on Friday. Despite the losses, gold has continued to respect key support tested last week into 1072 with the broader bearish outlook at risk near-term while above this threshold.
Looking ahead to next week, the US Non-Farm Payrolls (NFP) report will be central focus in light of the Fed’s attempt to buy more time. Despite the optimistic outlook held by the central bank, the ongoing slack in labor force participation, subdued inflation and a weakening outlook for global growth may continue to derail plans for higher borrowing-costs. Even though the central bank continued to endorse a 2015 rate-hike, the unanimous vote to retain the current policy suggest that the bar remains high for a September liftoff, and the ongoing mixed batch of data coming out of the U.S. economy may further dampen interest rate expectations as Chair Janet Yellen remains in no rush to remove the zero-interest rate policy (ZIRP).
With only so much time left before the next Fed meeting on September 17, the upcoming data prints may play an even greater role in driving market volatility across the financial markets, and signs undermining the Fed’s outlook for a stronger recovery may dampen the appeal of the greenback and limit the downside risk for gold. Although the broader outlook remains tilted to the downside amid the bullish sentiment still surrounding the reserve currency, weak U.S. data prints may continue to put a floor under bullion with the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDOLLAR) showing a meaningful turn at resistance into the close of July trade.
From a technical standpoint gold has continued to respect a critical support confluence noted last week at ~1070/73. The trade remains vulnerable for a rebound while above this region heading into August open initial resistance seen at the 2014 lows at 1130. The broader outlook for gold remains bearish while sub 1145/51 with a break of the lows targeting the 2010 low at 1044 backed by a key longer-term Fibonacci confluence lower down at 975/80. We’ll keep an eye on the August opening range for further guidance on our near-term directional bias with a breach of the recent consolidation range between below 1103 shifting the immediate focus higher next week.