Attention To These Developments And Dates For The Gold Price Next Week!

Gold price remained resistant for most of the week amid volatile market action. However, it suffered heavy losses on Friday and lost about 2% on a weekly basis. The economic picture will not release any high-level data in the first half of next week. Market analyst Eren Sengezer notes that traders will likely look for signs that signal the beginning of a technical correction.

Rising geopolitical tensions boost demand for safe harbor

Prior to the highly anticipated central bank statements, gold started the new week relatively calmly. This side consolidated the previous week’s losses. The yellow metal closed flat near $1,680 on Monday and posted modest losses on Tuesday. On Wednesday, Russian President Vladimir Putin announced a partial military mobilization. He also threatened nuclear retaliation, saying that the West wanted to destroy Russia. Rising geopolitical tensions have allowed the expensive metal to find demand as a safe haven. Thus, the gold price rose above $ 1,680 before losing its upward momentum in the second half of the day.

Fed said 75 bps, gold price saw hard sell

As expected, the Fed increased it by 75 basis points (bps) to the range of 3-3.25%. The Summary of Economic Forecasts (SEP), called the dot chart, showed that policy makers’ median view of the policy rate at the end of 2023 was 4.6%, compared to 3.8% in the dot chart in June. Also, the median outlook for the federal funds rate at the end of 2024 increased from 3.4% to 3.9%. The hawkish slope seen in the SEP supported US Treasury bond yields. This forced the gold to go down. At the press conference, FOMC Leader Jerome Powell acknowledged that there is no ‘painless way’ to tame inflation. “A delay in lowering inflation will only lead to more pain,” Powell said.

On Thursday, the dollar came under selling pressure. Also, the US Dollar Index (DXY) wiped out most of its post-Fed profits. In this direction, it helped gold to rise. The Bank of Japan (BoJ) left its monetary policy settings unchanged on Thursday. Subsequently, the Japanese yen lost considerable value to its main rivals. This triggered intervention in the foreign exchange market. The BOJ likely sold dollars to buy back the JPY to limit the currency’s depreciation.

DXY climbs to new heights, pressure on gold price rises

In the middle, the Bank of England and the Swiss National Bank increased their policy rates by 50 basis points and 75 basis points, respectively. Following the wild fluctuations of central bank announcements during European trading hours, markets calmed down during the American session. The 0-year US Treasury bond yield expanded its rally by not allowing gold to rise.

On Friday, disappointing PMI information from the eurozone and the UK caused the euro and the British pound to lose altitude. Thus, the dollar regained its strength. DXY hit a twenty-year high above 112.00. Gold price fell below $1,650 with the pressure of dollar replenishment. This marked its lowest level since April 2020. Data from the US showed that S&P Global Services PMI and Composite PMI rose sharply in early September. That put it one foot higher in DXY. It also forced gold to lag behind ahead of the weekend.

“In this scenario, the gold price may stage a recovery”

The Conference Board (CB) will release US Consumer Confidence information on Tuesday. The S&P 500 lost over 3% last week. An optimistic sentiment report could open the door for a rebound in US equities, according to the analyst. It is possible that this will also lead to a bearish correction of DXY. In this scenario, the analyst expects gold to stage a recovery. However, according to the analyst, these data alone do not significantly affect the market pricing of the Fed’s interest rate outlook. According to the CME Group FedWatch Tool, there is a 70% probability that the Fed will raise rates by another 75 basis points in November.

On Wednesday, the US Office of Economic Analysis will release its latest data on annual Gross Domestic Product (GDP) growth for the second quarter. Investors expect Q2 GDP to contract by 0.6%, matching the previous assumption. According to the analyst, since this information will be a revision, it is not likely to trigger a noticeable market repercussion.

Investors will follow PCE and Fedspeak closely

Market participants will closely monitor China’s NBS Manufacturing PMI and Non-Manufacturing PMI during Asian trading hours on Friday. The analyst says that if there is a meaningful recovery in the PMI data, gold bulls will see it as an opportunity to bet on a stable recovery. Before the weekend, the Personal Consumption Spending Price Index (PCE), the Fed’s preferred inflation indicator, will arrive. The analyst makes the following assessment:

Stronger-than-expected CPI data at the beginning of the month convinced investors that the Fed’s interest rate hike by 75 basis points in September. Since the PCE is a lagging indicator, its impact on the dollar’s valuation is likely to be short-term. Regardless, a pullback in the annual Core PCE is likely to weigh on the dollar. Of course, the opposite is also true.

Investors will also follow Fedspeak closely next week. According to the analyst, the dollar’s overbought conditions indicate that a random optimistic statement of the inflation outlook or comments that could be taken as less hawkish than Powell’s statement could pave the way for a deep correction in the dollar and help gold erase some of its losses.

Gold price technical view and gold assumption survey

Market analyst Eren Sengezer analyzes the technical outlook of gold in the following form. Gold trades near the lower end of the descending regression channel from March. Additionally, the Relative Strength Index is about to drop below 30, pointing to oversold conditions. If gold starts to correct, it could be seen as the primary recovery aim ahead of $1,660, $1,680, and $1,700. On the downside, a daily close below $1,640 is likely to bring in additional sellers. Continuing, it is possible that gold could lead to a real extension of its decline to $1,630 and $1,615.

According to the FXStreet claims survey, experts expect gold to enter the consolidation stage next week. Accordingly, the survey shows that the average goal is $1,651. The one-month outlook, however, paints a mixed picture, with less than 50% of experts trending bearish versus rising 33%.

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