Fundamental Forecast for Gold:Neutral
- Gold Prices Rejected at July Highs After Stellar NFP
- Gold prices rejected after poking above the 2011-2012 Trend-line
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Last week ended with another bump higher in Gold prices as an abysmal U.S. GDP print brought to question the prospect of any near-term rate hikes out of the Federal Reserve. But just a week later, we’ve seen a fairly brisk reversal of that thesis after a blowout NFP report on Friday elicited a quick burst of U.S. Dollar strength that permeated through global markets. Gold was not left unfettered, as gold prices put in an outsized-reversal lower after the announcement, falling by -1.7% on the day.
But the longer-term up-trend in Gold is still very much intact: Gold prices are up 26% on the year, even including this most recent retracement; and as has been widely publicized this is very much on the back of a Federal Reserve that continues to support markets with dovish policy. So the big question when setting up directional biases on Gold is when the Federal Reserve might begin talking up higher rates again? Now this doesn’t necessarily denote that a hike may be nearing, merely that the Fed is exploring the prospect of tighter policy options. This would be similar to what markets felt in May as the Fed talked up ‘2-3 hikes in 2016,’ or more specifically, speaking of potential hikes at their next meeting in June; which created USD-strength and brought a greater-than $100 retracement in Gold prices throughout the month of May.
After last Friday’s GDP print came in so far below expectations, the prospect of higher rates out of the U.S. diminished mightily. But after this morning’s NFP report came in far beyond what markets were looking for, the fear of a slightly-more-hawkish Fed has driven the Dollar higher, pulling down Gold prices to find support near prior price action resistance in the $1,335-area of the chart.
