Gold Price News: Gold Glitters Once Again 

Performance & Positioning

Gold has continued to build on last week’s recovery, gaining a further c. 1.5% this week at the time of writing. Now trading back around $2467/toz, gold is now back within striking distance of the all-time high of c. $2483/toz on 17 July. Preliminary data for physical gold ETF/ETC flows suggests that we have seen small net inflows thus far this week, which is notable given elevated gold prices and a recovery in major asset classes such as equities and fixed income.

Fundamental Drivers

Thus far this week, US rate markets have given back some of the yield increase seen the previous week, with 2-Year and 10-year US Treasuries c.15 bps lower and c.10 bps lower respectively. According to CME FedWatch, markets have also slightly increased their expectations of rate reductions at the next FOMC meeting on 18 September, with futures currently pricing in a c. 55% probability of a 0.50% cut and a c. 45% probability of a 0.25% cut in the key US Fed Funds rate.

Looking further ahead, futures markets suggest a total of three quarter-point rate cuts by the Fed’s meeting on 7 November and 4-5 quarter-point cuts by the Fed’s last meeting of the year on 18 December. In combination with a somewhat weaker dollar as measured by the Dollar Index (DXY) and elevated geopolitical risk in Russia/Ukraine and the Middle East, fundamental support for gold has strengthened.

Incoming economic data has been supportive of rate reductions, with Tuesday’s softer US PPI reading for July being particularly impactful. Looking ahead, we have crucial US CPI data for July on 14 August and US Retail Sales for July on 15 August.

Technical Analysis

Gold’s negotiation of major horizonal resistance at $2426/toz has now been confirmed and this level now constitutes major horizontal support. Recent price action suggests that gold also pierced major horizontal and descending minor oblique resistance at $2468/toz and $2471/toz respectively on 12 August. However, the subsequent lack of follow-through on 13 August and close near intraday lows suggests that such technical resistance – while weaker – remains. Momentum indicators, such as RSI and MACD have become more constructive, albeit still on depressed volumes. On balance, this suggests a reasonable probability that residual resistance currently at $2468/toz (horizontal) and $2470/toz (oblique) can be negotiated.

Should this occur, then the way seems clear for gold to challenge and possibly move beyond the all-time high of c. $2483/toz registered on 17 July. Major oblique resistance is currently indicated at just above $2498/toz.

To the downside, the gold chart indicates several support levels in addition to the proximate support/ resistance at $2468/toz. These include horizontal support at $2426/toz, the flat 20-day Simple Moving Average and weak ascending oblique support currently at £2418/toz and $2413/toz respectively, and the rising 50-day Simple Moving Average and weak descending oblique support at $2378/toz and $2368/toz respectively. Additional major horizontal support is offered at $2362/toz.