Gold Monthly Forecast – September 2018

Gold market saw a steady decline for the majority of the month of August 2018 and despite a rebound price action in later half of the month, the overall outlook for the pair was dovish in the month of August.

The first three weeks of August 2018 saw gold fall steeply as USD gained strength in the broad market which resulted in pair touching new 2018 lows. The first week saw the pair trapped within July’s momentum despite market sentiment remaining in favor of USD as FOMC statement released that week failed to have enough impact on the market. However, ongoing Sino-U.S trade war woes continued to influence the pair across the month as the first week saw Chinese government promising to retaliate with equal tariff if US Govt followed through on its threat of additional tariff’s announced in July which was starting point of sharp sell of activity in the Gold market. The second week saw Gold market move even further down as investors across the globe took to USD on risk off sentiment following multiple Geo-political events.

Gold Hits 18-Month Lows on Weak USD in Broad Market

The second week opened positive for USD on better than expected Jobs data in US markets and gained additional dovish influence on news of European markets suffering from the impact of No-deal Brexit scenario. This along with news of Italian government’s budget plans which put it at odds with EU increased demand for USD resulting in a decline of dollar-denominated Gold in global markets. However, the downside was limited due to disappointing US PPI data, but the Turkish crisis that was slowly boiling in the background came to light on the weekend resulting in third week opening completely bearish for Gold. News of European banks and key markets such as France and Spain have great exposure to the Turkish crisis increased risk-off sentiment and investors flocked to the most popular safe haven instrument in recent times ie., USD and this caused Spot gold to hit new 2018 lows at $1160.28 falling well below the $1200 handle which has served as important psychological support levels. But Gold recovered in the latter half of the third week on news of Chinese and US representatives meeting the following week for a two-day talk session to help prevent Sino-U.S. trade war from escalating further.

The fourth week of August saw gold continues to recover ground from 2018 lows as investors took to cautious stance while many short-term traders started selling off USD on news that Trump once again voiced his dis-satisfaction on Fed rate hikes, while this has become a repeated situations traders were still cautious as current Fed chair was selected by President Donald Trump. Another factor that caused dollar bulls to suffer against gold was news of two-day talks between US & China failing to bear fruit with both countries imposing the tariff on each others goods.

While Dallas Fed President Robert Kaplan helped minimize the damage during his speech midweek when he supported prospect for 3 to 4 more rate hikes, investors were still cautious ahead of Powell’s speech in Jackson hole symposium where his speech made traders fears true as he came out with a dovish statement mentioning future rate hikes could be data dependent, causing an increase in dollar sell of activity. However, the upside moves for Gold failed to materialize as it hit resistance on news of Trump’s actions to weaken both Euro and USD at the same time.

Outlook For September Remains Bearish As USD is Expected To Gain Ground on Fed Rate Hike Decision

The last week opened with President Trump announcing the US Government’s plans to buy Italian government’s debt bonds to be released in 2019. Italian government’s budget “Marshall plan” to revamp the country’s infrastructure after Genoa bridge collapse by announcing debt bonds worth $462 billion puts the country at odds with EURO as this move could set off another vicious round of Eurozone debt crisis and this could weaken European currency in broad market in long-term while also keeping US Greenback’s growth. While Gold gained considerably post its steady decline, the gains were limited as the pair stood exactly near where it had been at the start of month well near yearly lows as Dollar grew firm inboard market over increasing possibility of September Fed rate hike and the pair closed for the month on a neutral note.

Moving forward with month of September gold is expected to see continued decline in spot market as Dollar is expected to gain ground across the month and two major news in investors focus in near future trading session are US NFP data and Fed rate hike decision for September 2018 and in case both updates turn to be positive to US Greenback, Gold market could see continued downtrend with possibility of breaching past current 2018 lows.