While the initial range up action in gold yesterday rekindled bullish optimism the disjointed two-sided volatility this week and the extension of the lower high a pattern from the June high leaves the bear camp with a slight technical edge.
Gold was obviously undermined as a result of yesterday's scheduled data as that data seemed to shift the needle slightly away from the dovish track entrenched from the first day of Fed testimony earlier this week.
It would appear as if trade dialogue will end the week supportive of gold as the President has indicated China is not buying US agricultural products as requested when the next wave of tariffs were put on hold.
The gold market also looks to get support from weakness in the dollar but the trend in the dollar could be set this morning following the PPI report as the CPI report yesterday provided a bit of inflation psychology.
Another potential supportive force for gold into the end of the trading week is the fact that investors continue to push money into gold ETF's. In fact ETF's added 20,334 ounces yesterday to bring this year's total purchases to 3.27 million ounces.
Even silver saw positive investment inflow with a fourth straight day of inflows bringing this year's net ETF purchases to 26.1 million ounces.
It is also possible that gold will garner some buying interest from news that the London bullion market Association is requesting a new Basel liquidity rule to allow banks to trade more gold.
In the end, it is clear that the gold bulls need soft PPI data to extend the initial rally straight away.
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