This week gold has traded within an extremely tight range of around $20. There has been a narrow range of $150 for past 3 months, from $1525 to $1675, as central banks have failed to provide firm commitment to fresh stimulus packages – this winds down to a tighter range between major economic releases.
As we are now in the summer doldrums with half of the world taking their holidays or watching the Olympics, the narrow range wasn’t much of a surprise – the gold futures trading volume 30-day average is around 169,000 lots…this week some trading days have seen less than half of that average.
As always, the week following the major central bank announcements tends to be a quieter week on the news front.
The Aussies left their rates unchanged, which was expected and so had little impact on the market. There was weak data across Europe which helped push gold prices slightly higher as it strengthens the case for intervention – Italian GDP contracted in Q2, Greek unemployment rose to record highs (unsurprisingly) and German manufacturing forecasts were reduced. Both the ECB and Bank of England pegged back growth predictions from previous forecasts.
As we are now in the summer doldrums with half of the world taking their holidays or watching the Olympics, the narrow range wasn’t much of a surprise – the gold futures trading volume 30-day average is around 169,000 lots…this week some trading days have seen less than half of that average.
As always, the week following the major central bank announcements tends to be a quieter week on the news front.
The Aussies left their rates unchanged, which was expected and so had little impact on the market. There was weak data across Europe which helped push gold prices slightly higher as it strengthens the case for intervention – Italian GDP contracted in Q2, Greek unemployment rose to record highs (unsurprisingly) and German manufacturing forecasts were reduced. Both the ECB and Bank of England pegged back growth predictions from previous forecasts.
The lack of action from the ECB to help tackle the regions debt crisis continues to dampen markets, including gold. Clear statements of intent and action are required out of the Eurozone to help underpin confidence across all markets.
The Commitment of Traders report for the week ended 31st July showed a significant rise in net-long positions in the “big dogs” managed money accounts. This is an indication that the fund traders see more potential to the upside right now.
In the midst of this gold has crept higher throughout the week – although as I’m writing this on Friday morning there has been a decline overnight from Thursday’s high off the back of downbeat economic news in China.
The price has held strong above $1600 all week. The longer it does this, the better the bullish case looks. Many analysts are speculating that the Fed will announce that QE3 will commence at some point in September, but the US Elections in November cast some doubts on that.
The Commitment of Traders report for the week ended 31st July showed a significant rise in net-long positions in the “big dogs” managed money accounts. This is an indication that the fund traders see more potential to the upside right now.
In the midst of this gold has crept higher throughout the week – although as I’m writing this on Friday morning there has been a decline overnight from Thursday’s high off the back of downbeat economic news in China.
The price has held strong above $1600 all week. The longer it does this, the better the bullish case looks. Many analysts are speculating that the Fed will announce that QE3 will commence at some point in September, but the US Elections in November cast some doubts on that.
| In the Eurozone next week there is data on French, German and European GDP. In the US the focus will be on consumer spending and inflation, as well as the University of Michigan Confidence survey which is seen as a general health check of the economy. In the UK, eyes will be on jobless claims and inflation numbers. On the technical front, it still looks like a pretty level playing field for the bulls and the bears, with good strategies on both sides. It is our opinion that it is slightly more favourable to the bulls at the moment. There have been higher lows forming since the $1526 low in mid-May. | |
Since the end of July these have taken on a stronger, more consistent shape where the market looks like it’s gathering some momentum for a breakout above the $1625-$1630 level – although as we said before the trading volumes this week are low and there has been a dearth of news, so it’s still a case of watching and waiting. We want to see that level taken out convincingly before piling in.
A strong break above $1630 would see next resistance at $1660ish and again around $1690 – beyond $1700 there really isn’t much resistance all the way back up to $1800.
On the downside, there has been strong support at $1605-$1610 this week and below that we’ve got the round number of $1600. Should that give way, there is support around $1580 and again at $1560.
Should we fall through that level we’d expect to test the $1525 level again where there is extremely strong support. As we’ve been saying for months now, if that gives way we’ll be diving in short with everything we’ve got.
A strong break above $1630 would see next resistance at $1660ish and again around $1690 – beyond $1700 there really isn’t much resistance all the way back up to $1800.
On the downside, there has been strong support at $1605-$1610 this week and below that we’ve got the round number of $1600. Should that give way, there is support around $1580 and again at $1560.
Should we fall through that level we’d expect to test the $1525 level again where there is extremely strong support. As we’ve been saying for months now, if that gives way we’ll be diving in short with everything we’ve got.
