- Gold Trades into Resistance; Resistance at 1325 and 1335
- Gold, Crude Prep For Volatility As Unrest In Eastern Europe Escalates
Gold prices are considerably lower on the week with the precious metal
down more than 2.3% to trade at $1307 ahead of the New York close on
Friday. The losses come amid a tumultuous week for markets with
geopolitical tensions continuing to build both in Ukraine and Israel. A
downed civilian airliner in Ukraine and an Israeli ground invasion of
Gaza fueled a substantial rally in gold on Thursday as broader equity
markets turned over. The subsequent gold rally halted at a key
resistance range and while the technical picture here is a little
murky, our baseline scenario is for further weakness in gold while sub
$1324.
Looking ahead to next week, investors will be closely eyeing the
release of the US Consumer Price Index (CPI) with consensus estimates
calling for the headline reading to hold at an annualized rate of 2.1%.
In light of the recent commentary from Janet Yellen in this week’s
Humphrey Hawkins testimony, the central bank chair continued to suggest
that the inflation outlook remains “noisy” due to temporary factors.
However, a strong inflation print may undermine the Fed’s dovish tone
as a growing number of central bank officials show a greater
willingness to normalize monetary policy sooner rather than later.
From a technical standpoint the outlook for gold remains clouded with a
mid-week rally taking prices back above the initial July opening range
low. That said, it’s important to note that our topside bearish
invalidation level remains at the zone between the 38.2% extension off
the 2013 low and the 61.8% retracement from this month’s high at
$1322/24.This week’s rally met strong resistance at this threshold and
near-term focus will favor the short-side of the trade while below this
threshold. Interim support rests at $1305 and is backed by the
confluence of the monthly low, the 50% retracement of the June rally,
the 50-day moving average and trendline support off the June low at
$1292. A break below this level further validates our broader
directional bias with such a scenario eyeing subsequent targets into
more significant support at $1270. A topside breach/close above $1324
invalidates our near-term approach with subsequent resistance levels
seen higher at $1335 the monthly high at $1345 and the 78.6%
retracement of the decline off the March highs around $$1360. We will
maintain a neutral bias heading into next week’s CPI data while noting a
greater inclination to sell while below $1324.
