Gold appears to be on track for another week in the greens

黄金 at the time of this report, seems to be continuing its upward trajectory, yet appears to have remained relatively unchanged since trading started for the week. We note the potential for high volatility in the gold market, due to the numerous high-impact financial releases stemming from the US which are due to be released during the week. This report aims to shed light on the catalysts driving gold’s price, assess its future outlook and conclude with a technical analysis.

US Mixed Employment data

The US Employment data was released on Friday, appears to have eased market analyst’s expectations of future rate hikes.  The lower-than-expected average hourly earnings rate and an increase in the unemployment rate, where indicative of a loosening labour market, despite the better-than-expected Non-Farm Payrolls figure. As such, market expectations of future rate hikes by the Fed appear to have eased, as a looser labour market, may weaken the Fed’s resolve to continue on its aggressive rate hiking path as further rate hikes could result in an overtightening scenario which may lead to the US economy entering a recession. Furthermore, as a result of market analyst’s expectations of easing inflationary pressures down the pipeline, the precious metal may have capitalized on longer term expectations of the Fed potentially remaining on pause or even cutting rates, albeit a far-fetched scenario at this time. Therefore, a weaker greenback may allow overseas investors to purchase the gold bullion at a lower price, thus leading to an increase in demand, which may support the price of the precious metal.

China’s economic woes

The continued issues faced by China’s economy, such as it’s property sector turmoil 和 local government debt, appear to be worrying for market participants. As such, due to China being one of the worlds largest economies, any uncertainty regarding their economic stability, could weigh on the global economy and should China’s economic woes continue, they may inadvertently weigh on other major economies, which in turn could fuel recession worries on a global level. Therefore, the uncertainty surrounding China’s economic recovery, could be one of the reasons that have facilitated gold’s ascent due to its safe haven status during times of economic uncertainty. However, the Chinese Government appears to be attempting to stimulate economic growth by implementing measures such as reducing the amount of foreign currency required to be held by financial institutions in reserve. This may be perceived as an  attempt to boost economic activity in the region , as local administrations in Beijing 和 Shanghai  are also lowering the minimum mortgage interest rates for first time homebuyers in an apparent attempt to boost the ailing property market. In conclusion, the attempts made by the Chinese government, may increase confidence in China’s economic recovery, yet we believe that this may be short lived and that underlying worries, could potentially persist and as such push the precious metal to higher ground.

技术分析

黄金/美元4小时走势图

• Support: 1940 (S1), 1920 (S2), 1900 (S3)
• Resistance: 1955 (R1), 1977 (R2), 2002 (R3)

The precious metal appears to be moving in an upwards fashion, despite moving in a slightly sideways fashion since the start of the week. We tend to maintain a bullish outlook for the commodity and supporting our case is the upwards moving channel formed on the 22  of August, in addition to the RSI indicator below our 4-Hour chart currently registering a figure above 50, implying a bullish market sentiment.

For our bullish outlook (gold report) to continue, we would like to see a clear break above the 1940 (R1) resistance level, with the next possible target for the bulls being the 1977 (R2) resistance ceiling in addition to continuing to validate our upwards moving channel formed on the 22  of August. On the other hand, for a bearish outlook, we would like to see a clear break below the 1940 (S1) support level if not also making a clear break below the 1920 (S2) support base, with the next possible target for the bears being the 1900 (S3) support level. Lastly for a neutral outlook, we would like to see the precious remaining confined between the 1940 (S1) support and 1955 (R1) resistance levels respectively.

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