The week opened on a slightly negative band for gold, as prices fell on Monday, sticking to a tight trading range seen over the past three weeks as markets turned cautious ahead of upcoming U.S. consumer inflation data and a Federal Reserve meeting.
Last week gold was supported by soft labour data. This pushed gold prices a bit over expectations that the Fed will skip a gold rate hike at the conclusion of a two-day meeting on Wednesday.
There is a lot of geopolitical and economic uncertainty occurring globally.
The ongoing Ukraine crisis, the Fed’s economic uncertainty, and the financial crisis have led to a lot of volatility in the market. It has pushed gold into a tight trading range.
Gold prices have stuck to a trading range of between $1,930 and $2,000 an ounce over the past three weeks, with uncertainty over the economy and monetary policy offering little cues for a breakout.
Gold stands to benefit from any potential pause by the Fed, and is expected to see increased safe-haven demand as global economic conditions worsen this year. However given that U.S. interest rates are likely to remain higher for longer, the upside in the yellow metal may be limited as returns on debt appear more attractive.
Rising interest rates had battered gold prices through 2022, as the Fed enacted its most aggressive pace of monetary tightening since the 2008 financial crisis. But the prospect of a pause in 2023 has kept gold upbeat so far this year.
While we will not argue against an upside follow-through in gold and silver prices, we still think the markets lack solid and sustainable bullish fundamental themes.
While we see the PGM markets continuing to slide, we see gold weakening but remaining capable of respecting consolidation support at $1,950. Silver on the other hand has a very strong chart set up and could be separating from financial market-related fundamentals and in turn, may be shifting toward factoring tight supply and hope for tech-related demand improvement. However, both gold and silver should expect turbulence in the coming 3 sessions with global inflation readings and a US Fed rate decision scheduled for Wednesday afternoon. Uptrend channel support in July silver is far below the trade today down at $23.91 with closer pivot point support seen at $24.32. As indicated already we see August gold remaining within a $1950 and $2000 trading range, but chart support is likely to be enhanced by weakness in the dollar.
Sentiment in the gold market remains bullish as momentum supports higher prices but analysts are warning investors that they should not expect prices to break above $2,000 an ounce next week as the Federal Reserve looks to maintain its hawkish monetary policy stance even as it leaves rates unchanged.
However, signs of a softening US jobs market should provide for ongoing declines in the dollar and ongoing declines in US treasury yields which are probably capable of pushing gold back up into consolidation resistance at $2001.