Fundamental Forecast for Gold: Neutral
- Gold and Copper Weaken Before U.S., China data; Oil Rebounds
- Gold Downtrend Resistance is Near 1110 on NFP Friday
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Gold prices are softer for a seventh consecutive week with the precious metal off by just 0.10% to trade at 1094 ahead of the New York close on Friday. Despite the ongoing mixed batch of data coming out of the world’s largest economy, expectations for higher U.S. borrowing costs have continued to weigh on demand for bullion as the reserve currency pressed into four-month highs. However, despite the broader bearish outlook, prices have continued to hold above key technical support and the metal remains vulnerable for a rebound over the near-term.
The U.S. Labor Report released on Friday showed Non-Farm Payrolls (NFP) rising by 215K in July with the unemployment rate holding steady at an annualized 5.3% for the second consecutive month. Although the print was just below market expectations, the upward revision to the previous month’s data further fueled expectations for a September rate hike amid the ongoing improvements in the labor market. The immediate reaction saw gold test the weekly lows before reversing course to close higher on the session and the snapback in price suggests that the short-side of the trade may be nearing an interim exhaustion point.
With that said, traders will be eyeing retail sales data & the University of Michigan confidence surveys on tap for the week ahead. Consensus estimates are calling for a 0.5% rebound in household spending following the unexpected 0.3% contraction in June and if the data shows a meaningful increase in consumption, look for gold to remain under pressure with prices holding a tight range above key support into the open of August trade.
From a technical standpoint gold has continued to hold above critical support into 1067/70 where the median-line off the 2014 high converges on basic trendline support dating back to June 2006 and the 100% extension of the decline off the yearly high. Weekly momentum has also continued to hold above the 30-threshold and as noted last week, gold remains vulnerable for a near-term recovery while above this region. Note that although prices are lower for a seventh consecutive week, gold has been unable to test the 5-year low made back on July 24th. Key resistance remains at 1145/50 with only a break above the upper median-line parallel off the yearly high invalidating the broader downside bias (bearish invalidation~ 1175). A break of the lows targets the 2010 low at 1044 backed by a key longer-term Fibonacci confluence lower down at 975/80.