Spot gold is consolidating within Friday’s range as traders look ahead to this week’s FOMC meeting. Friday’s weak close keeps focus on the downside, but a softer dollar offers some support.
The Fed’s two-day FOMC meeting begins tomorrow. No change in policy is expected, but markets will as usual be looking for clues on policy moves in the months ahead. For example, will the 4.1% advance Q2 GDP print lead to more hawkish guidance into year-end?
The BoE will announce policy on Wednesday as well. The UK economy has only been growing slowly and Brexit concerns persist yet the BoE is likely to hike rates this week by 25 bps amid rising demand for credit and inflation concerns. The BoE last raised rates in November and a hike this week would only be the second since July of 2007.
At the end of the week, we’ll get the U.S. jobs report for July. Median expectations for nonfarm payrolls are +190k. The unemployment rate is expected to tick back down to 3.9%.
Gold’s test of the upside late last week faltered and the close on Friday below the 9-day moving average leaves the downside vulnerable. The yellow metal is straddling unchanged today, perhaps garnering a little support from a softer dollar.
The dollar index chart continues to look toppy. A breach of last week’s low at 94.08 would favor a retest of the 93.71 low from 09-Jul initially. However, potential would be back to the June lows at 93.21/19.
Such a move in the dollar may be enough to spark a rally in gold. The timing is about right in terms of seasonality and this morning’s Zaner Daily Metals Newsletter suggests the speculative long position in gold is “mostly liquidated" at this point, which “could slow stop loss selling and perhaps discourage fresh outright selling.“
We’ll continue to watch the 9-day MA (1226.22 today) on a close basis for short-term directional queues. A close above the 20-day MA (1238.58 today) is still needed lend some credence to a bottoming scenario ahead of key support marked by the 1204.72 low from last July. Intervening support is noted at 1211.52/1201.57, last week’s low and the midpoint of the 1046.18/1375.17 range.
Silver starts the week slightly higher, back above its 9-day MA (15.47 today). However, silver has closed lower the last 7-weeks in a row, so it’s difficult to be anything but bearish at this point. A close above the 20-day MA (15.72 today) is needed to ease short-term pressure on the downside and return focus to the $16 area. Last week’s high at 15.66 offers intervening resistance.
Initial support is at 15.32. A breach of this level would return focus to the 15.17 low from 18-Jul.
Platinum’s inability to sustain gains above the 20-day MA leaving a neutral short-term technical tone. However, the dominant trend remains bearish after platinum tumbled to a near 10-year low of 791.85 earlier in the month.
Palladium is back above its 20-day MA this morning, helping the 9-day MA rotate higher. While price action remains confined to Friday’s range, the technical picture here is a little more encouraging. However, I still think the PGMs are waiting for gold and silver to pick a direction.
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