Gold Prices Lower on Shifting Policy Outlook- FOMC Minutes, NFP on Tap

Fundamental Forecast for Gold: Neutral

Gold prices were down this week with the precious metal off by 0.98% to trade at 1243 ahead of the New York close on Friday. The losses come alongside weakness in broader equity markets with all three major US indices flat / lower on the week. However, with concerns over a broader shift in the tone of global central bankers and growing doubts regarding the future of fiscal policy, gold is caught between a rock and hard place with the technical outlook also highlighting a near-term consolidation range.

Rhetoric from the FOMC, ECB, BoE & BOC continued to weigh bullion as concerns mounted that global central banks are becoming more inclined to scale back on their accommodative policy stance. The result has fueled a sell-off in bonds (rally in yields), putting pressure on non-yielding assets like gold.

Highlighting the economic docket next week are the U.S. ISM figures, FOMC minutes and the June Non-Farm Payrolls report. With the Fed looking to begin offloading its massive $4.5 trillion balance sheet, U.S. data will need to continue to perform – as it stands markets are pricing just a 54% chance the central bank will hike in December. For gold, the outlook heading into the monthly open remains precarious with the decline now approaching broader up-trend support as sentiment begins to level off.

Gold Prices Lower on Shifting Policy Outlook- FOMC Minutes, NFP on Tap
  • A summary of IG Client Sentimentshows traders are net-long Gold - the ratio stands at +4.4 (81.5% of traders are long)- bearishreading
  • Long positions are 6.1% higher than yesterday but 2.9% lower from last week
  • Short positions are 4.7% lower than yesterday but 7.7% higher from last week
  • While broader retail sentiment continues to point lower, positioning is more net-long than yesterday but less net-long from last week. The combination of current sentiment and recent changes gives us a mixed trading bias and highlights the risk for near-term exhaustion on the downside.

Find out what current Gold positioning is saying about the current trend.Get more information on Sentiment here Free!

Gold Weekly

Gold Prices Lower on Shifting Policy Outlook- FOMC Minutes, NFP on Tap

Earlier this month we noted that, “Gold prices have were unable to make a weekly close above key resistance at 1278 yet again this month, with the pullback now eyeing weekly support 1242 -backed closely by a basic trendline extending off the late-January low.” We are testing that support region now.

Gold Daily

Gold Prices Lower on Shifting Policy Outlook- FOMC Minutes, NFP on Tap

Gold prices look to close the week at the 1241/45 support zone we’ve been tracking for the past few weeks. Note that this threshold is backed closely by the 200-day moving average and basic channel support extending off the late January low ~1230/33-an area of interest for exhaustion low / long-entries and broader bullish invalidation.

Gold 240min

Gold Prices Lower on Shifting Policy Outlook- FOMC Minutes, NFP on Tap

Gold Prices Lower on Shifting Policy Outlook- FOMC Minutes, NFP on Tap

A closer look at price action sees gold continuing to trade within the confines of this descending pitchfork formation with prices holding just below a sliding parallel extending off the June 23rd high. The focus heading into the start of July trade is on channel support which converges on the 76.4% retracement at 1230/33.The immediate short-bias is at risk heading into this threshold.

A breach above near-term slope resistance shifts the focus back towards 1259 with key resistance / bearish invalidation steady at 1265- A close above this level would be needed to suggest a more significant low is in place. Bottom line: heading into the monthly open we’ll be on the lookout for a near-term low with a breach of this formation to needed to shift the broader focus higher. A close below 1230 would dramatically change the outlook for gold heading into the Q3.

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---Written by Michael Boutros, Currency Strategist with DailyFX

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