Gold Capped By Better US Data
Gold Rally Pauses
Gold prices are a little softer today as USD rebounds on the back of some better-than-forecast US data. Prelim quarterly GDP was seen rising to 6.4% above the expected (and prior) 6.2% the market was looking for. We also saw a slight lift in durable goods along with core PCE rising to 0.2% from 0.1% prior. While the move in USD is nothing major, it’s been enough to cap the gold rally for now on the back of the recent 15% rise we’ve seen off the August lows.
Fed Expectations
A dovish shift in traders’ Fed rates expectations was the key driver behind that rally, itself fuelled by a downturn in US data. If US data starts to pick up again now, we could see rate hike expectations creeping higher again, further weighing on gold as USD rebounds accordingly. For now, market pricing for a September hike is little changed, around 40% from 35% prior to the data, though this could push higher if we see any further data strength in the meantime.
Jackson Hole
Looking ahead, traders will now be watching Fed chairman Warsh’s comments at the Jackson Hole Symposium on Friday. This will be Warsh’s first proper communication after the July FOMC where he delivered a somewhat confusing press-conference which spiked uncertainty. If Warsh can give a clearer signal on likely Fed policy this should provide a catalyst for the next move in gold, either r afresh break higher or a deeper correction.
Technical Views
Gold
The rally in gold has stalled for now ahead of the 4,762.97 level. However, while price holds above the 4,558.62 level, focus is on a fresh push higher with 4,885.51 the higher target for bulls. To the downside, 4,389.24 is the next support level to note.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.