Fundamental Forecast for Gold:Bearish
- Gold Responds to Trendline
- Gold Climbs On Ukrainian Turmoil, Crude Oil Cautiously Recovers
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Gold prices are slightly firmer this week with the precious metal higher by 0.48% to trade at $1287 ahead of the New York close on Friday. It’s been a lackluster month for gold traders and despite the volatility ($49 or 3.75%) prices are just 0.35% higher for the month of August. As we head into the open of September trade, the focus shifts back onto the economic data front as bullion holds just above the technically significant 200-day moving average.
As tensions in the Middle East and Ukraine continue to escalate, the relative support they have offered gold has continued to wane as the focus shifts back on to the outlook for monetary policy. With steady improvement in US data, interest rate expectations have crept forward keeping a bid under the greenback to the detriment of gold. As such, heading into next week all eyes will be fixated on the economic docket with ISM Manufacturing and Factory Orders on tap ahead of Friday’s highly anticipated non-farm payrolls report.
The shortened holiday week kicks off with ISM data on Tuesday with the consensus estimates calling for a print of 57.0 in August, down from 57.1 in July. Factory orders on Wednesday are seen much stronger with calls for a 10.8% print for the month July, a stark contrast to the 1.1% read seen a month earlier. Highlighting the week’s event risk will be the US employment report on Friday with August Non-Farm Payrolls expected to come in at 225K, up from 209K in July as unemployment downticks to 6.1% from 6.2%. As always, we’ll be closely eyeing the changes in the labor force participation rate when trying to assess the validity of the drop in the headline figure. Look for gold to come under pressure the stronger the data is, with a miss on the print likely to offer some relief to the battered metal.
From a technical standpoint, gold remains vulnerable for further losses as we open up September trade and while we will need to confirm that bias with a break of the monthly opening range, our broader outlook will remain tentatively bearish while below near-term resistance at $1292. A break above this region targets more significant resistance at the confluence of the 50-day moving average and channel resistance dating back to the July high at $1306 and we will reserve this level as our bearish invalidation threshold. Interestingly, gold has alternated positive and negative monthly closes for the last seven months and while we eked out a gain this month, suggests we should be looking lower in September. Key support rests at the August lows and the 78.6% extension off the July high at $1271 with a break below this level eyeing support objectives at $1258/60, $1251 and $1224. Look for major event risk next week to offer a catalyst with central bank interest rate decisions and the US employment report on Friday in focus.