Gold Fundamental Analysis – week of August 1, 2016 -Forecast

Gold closed the week at 1358.05 seeing a gain of 2.64% as traders reacted to the FOMC and Bank of Japan. Gold should sit still this week as traders wait for the Bank of England and its promise of added stimulus at its August meeting. The week also ends with the US jobs report. The dollar price of gold bullion will hold onto its gains next week, according to respondents to S&P Global Platts Gold Sentiment Survey, on expectations the macro economic environment will continue to support prices.

The Platts survey of 20 industry participants showed most were expecting gold prices to move sideways or firm further next week, with macro developments playing a key role.

The climb in gold prices comes alongside a steep sell-off in the greenback with the. Dollar Index reversing sharply from technical resistance early in the week. Despite the recent rebound, prices are now approaching resistance with the immediate topside bias at risk heading into next week. Ideally we’ll be looking for a more prominent set-back to offer more favorable long-entries near structural support.

U.S. 2Q GDP figures released on Friday grossly missed expectations with an annualized print of just 1.2% q/q and a downward revision to last quarters’ already dismal read to just 0.8% q/q. The core personal consumption expenditure (PCE), the Fed’s preferred gauge of inflation, slipped to 1.7% from 2.1% the previous quarter. The combination of slower-than-expected growth & weak inflation all but nullifies prospects for a rate hike at the upcoming September meeting. Fed Fund Futures saw a dramatic decrease in interest rate probabilities on the back of the release with markets now pricing in the first material expectation for a rate hike (>50%) to be in September of 2017.

Looking ahead to next week, traders will be closely eyeing the U.S. economic docket with ISM data, factory orders, ADP employment and non-farm payrolls on tap.

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