Gold maintained a sideways motion since our last report. In today’s report we are to discuss the validity of the negative correlation of gold with the USD, fundamental issues possibly affecting gold’s price but also financial releases that could have some repercussions on the precious metal. We make a start by noting the following:
- Gold’s price as noted reversed any gains made over the past week, while the USD seems to be edging higher, yet the movements are asymmetric hence we do not adopt for the time being the assumption that the negative correlation between the two trading instruments is active. Furthermore we note that US bond yields dropping significantly on the 1st of August tended to remain at relatively low levels, with some even dropping today. Hence we do not see the negative correlation of US bonds and gold’s price being active either at the current stage.
- Also there seems an easing of market worries for geopolitical issues, especially about the US-Russian relationships, ahead of the Trump-Putin summit in Alaska on Friday. Media highlight the possibility of some land swap in Ukraine for peace, yet the issue remains highly uncertain and the stakes are high, given also that the US President has warned China and India of new tariffs should they continue buying Russian oil, signifying a possible overspilling of the geopolitical issue on the global economy. Should we see the two sides reaching a deal or even nearing one, easing market worries, we may see gold’s price retreating. On the flip side should the two sides not reach a deal and the adversary between the two sides intensifying causing market worries to be enhanced, we may see gold’s price getting some support.
- Another fundamental issue that could affect gold’s price are the trade relationships between the US and China. US President Trump’s tariff deadline for China is nearing and should the two sides fail to reach an agreement, once again we may see gold’s price enjoying some safe haven inflows and vice versa. An interesting trivia related to the issue is the fact that AMD and NVIDIA have agreed to pay 15% of their chip sales in China to the US government.
- Also for gold traders we note the release of the US CPI rates for July. The release besides the FX market could also have ripple effects on gold’s price. Currently expectations are for the headline rate and the core rate to accelerate implying a resilience of inflationary pressures in the US economy, which may ease any dovish expectations the market currently has for the Fed’s next actions. Should the rate accelerate beyond market expectations we may see the release weighing on gold’s price while should the actual rates fail to reach the current forecasts, or even should they slow down showing an easing of inflationary pressures we may see gold traders being taken by surprise and the precious metal’s price gaining substantially.
Gold technical analysis
Gold’s price as noted reversed any gains made over the past week, while the USD seems to be edging higher, yet the movements are asymmetric hence we do not adopt for the time being the assumption that the negative correlation between the two trading instruments is active.
Furthermore we note that US bond yields dropping significantly on the 1st of August tended to remain at relatively low levels, with some even dropping today. Hence we do not see the negative correlation of US bonds and gold’s price being active either at the current stage.
Also there seems an easing of market worries for geopolitical issues, especially about the US-Russian relationships, ahead of the Trump-Putin summit in Alaska on Friday. Media highlight the possibility of some land swap in Ukraine for peace, yet the issue remains highly uncertain and the stakes are high, given also that the US President has warned China and India of new tariffs should they continue buying Russian oil, signifying a possible overspilling of the geopolitical issue on the global economy.
Should we see the two sides reaching a deal or even nearing one, easing market worries, we may see gold’s price retreating. On the flip side should the two sides not reach a deal and the adversary between the two sides intensifying causing market worries to be enhanced, we may see gold’s price getting some support.
Another fundamental issue that could affect gold’s price are the trade relationships between the US and China. US President Trump’s tariff deadline for China is nearing and should the two sides fail to reach an agreement, once again we may see gold’s price enjoying some safe haven inflows and vice versa. An interesting trivia related to the issue is the fact that AMD and NVIDIA have agreed to pay 15% of their chip sales in China to the US government.
Also for gold traders we note the release of the US CPI rates for July. The release besides the FX market could also have ripple effects on gold’s price. Currently expectations are for the headline rate and the core rate to accelerate implying a resilience of inflationary pressures in the US economy, which may ease any dovish expectations the market currently has for the Fed’s next actions.
Should the rate accelerate beyond market expectations we may see the release weighing on gold’s price while should the actual rates fail to reach the current forecasts, or even should they slow down showing an easing of inflationary pressures we may see gold traders being taken by surprise and the precious metal’s price gaining substantially.
XAU/USD Daily Chart
- Support: 3250 (S1), 3122 (S2), 2955 (S3)
- Resistance: 3500 (R1), 3650 (R2), 3800 (R3)
