Price of Gold Fundamental Daily Forecast – Up for Week as Weak Shorts Get Caught Watching Momentum, Trading Headlines
Gold futures are trading sharply higher at the mid-session on Friday and for the week as the bulls stuck it to the analysts who called it bearish last Friday and Monday. Now what are they going to do? Switch back to bullish. Tell us to sell rallies?
Let face it, they’re in a tough spot since the market is trading where it was last Friday and everyone was watching the downside momentum caused by the robust non-farm payrolls report. And after Monday’s steep break tested the lower end of a long-term retracement zone bringing in the buyers, some analysts don’t know what to do because they were played by the momentum and took their eyes off the ball when gold was hitting a value area.
At 16:12 GMT, December Comex gold is trading $1780.90, up $29.10 or +1.66%.
The headlines will tell you on Friday that gold is trading higher because weaker Treasury yields reduced the opportunity cost of holding the non-yielding asset. They’ll also say that a weaker dollar led to more foreign buying of dollar-denominated asset.
We write that because we’ve read that in the book Gold trading 101. But actually, gold has gone nowhere this week because there is still too much uncertainty over the Fed’s next move.
Last Friday’s July U.S. Non-Farm Payrolls report was bearish for gold because traders thought it would lead the Fed to an earlier than expected tapering of asset buying stimulus. Gold rallied throughout the week because the CPI report said “not so fast” about easing monetary policy. So prices went back to where they were last week because the narrative went back to where it was last week.
In other words, after a week of volatile price action, we know exactly what we knew last week about the Fed’s timing of its tapering plans. Nothing.
The Fed meets on September 21-22. Before the meeting, policymakers will have the chance to get another look at Non-Farm Payrolls and CPI for August. Labor market and inflation conditions be changing in August because of the surge in COVID-19 cases and I think Fed officials would want to take a look at those numbers before making their decision about tapering.
As far as announcing tapering at the Jackson Hole Central Bankers’ summit in late August, I think it would not be prudent for the Fed to make such an important decision just to grab a headline and given the currently unknown damage the spread of the delta variant could be causing.
I think gold buyers realize this too and have reloaded because no one is really certain about the Fed’s next move.
I’ll throw this out there too. If gold recovers $1795.00 then this will put prices back to where they were before the strong Non-Farm Payrolls report was released on August 6. Could this be telling us that traders expect the August numbers to come in on the weak side?
By the way, overtaking $1795.00 will put gold on the bullish side of a long-term retracement zone. Stop trading the headlines and learn to read the price action.