GOLD (XAUUSD) Fundamentals - Weekly Outlook: 2014, August 24 - August 31
- Gold Braces For Volatility Ahead of Yellen, Crude Oil Consolidates
- Gold Slipping Towards 200 DMA…Again
Gold prices
are sharply lower this week with the precious metal off by more than
2.1% to trade at $1276 ahead of the New York close on Friday. The
decline marks the second weekly loss and takes bullion into fresh
nine-week lows as the greenback continued to rip higher with the Dollar Index climbing nearly 1% in its single largest weekly
range since mid-April.
A string of strong reports out of the US coupled with a slightly more hawkish tone to the minutes from the latest FOMC
policy meeting has kept the dollar bulls in control with gold trading
heavy as easing geopolitical concerns and a more upbeat assessment of
the economy continued to buoy risk higher alongside the greenback. All
eyes fell on Jackson Hole Wyoming on Friday for the Kansas City Economic
Symposium with Janet Yellen’s keynote speech largely striking a
balanced tone. The Fed Chair noted significant under-use of labor
resources while citing room for wage increases that would remain rather
benign on inflation. She seemed to play both side when it came to
interest rates, noting that slower progress on goals may delay rate
increases while faster progress would bring hikes sooner. The result
offered little direction for gold prices which traded sideways into the
close of the week after posting 5-days of consecutive declines to break
into fresh monthly lows.
Looking ahead to next week, traders will be closely eyeing the second
print for 2Q GDP with consensus estimates calling for a slight downward
revision to an annualized pace of 3.9% from 4% q/q. July durable goods
orders, pending home sales, and the final read for the August
University of Michigan Confidence survey are also on tap next week and
we’ll look for stronger data to broadly remain supportive of the dollar
/ limit gold advances. The biggest possible supportive variable for
gold would be a more substantial sell-off in stocks with such a
scenario likely to fuel risk-off flows into the perceived safety of the
yellow metal. That said, the technical picture remains rather bleak.
From a technical standpoint, gold remains within the confines of a
well-defined descending channel formation off last month’s high and our
focus remains lower while below the 200-day moving average at $1284
with interim support seen at $1271. A break below this level eyes a key
support zone at $1251/58 backed by $1233 and $1206. We’ll reserve
$1292 as our bearish invalidation level with a breach above targeting
key resistance at $1321.
