Speaking at a research symposium at Jackson Hole, Wyoming on Friday, Fed Chair Jerome Powell made the case that gradual rate hikes were the best way to protect U.S. economic recovery, keep job growth strong and inflation under control.
The remarks appeared to have disappointed dollar bulls hoping for a more hawkish message.
· “Jerome Powell’s comments introduced some uncertainty into the market, with a stress on policy gradualism,” said Nicholas Frappell, general manager at Australia-based ABC Bullion.
· Spot gold was up 0.1 percent at $1,206.34 per ounce by 0420 GMT. It had climbed 1.7 percent on Friday in its biggest one-day percentage gain since May 2017. U.S. gold futures were down 0.1 percent at $1,212.70 an ounce.
· “The weaker USD is giving gold a nice lift after Fed Chair Jerome Powell signalled that the FOMC remains on a gradual rate hike path,” said Stephen Innes, APAC trading head, OANDA.
“While the speech was a tad dovish, gold’s resurgence may be as much position-related as it is a real demand given the extended short gold positions that have been built up over the past few weeks which resulted in several stop losses runs getting triggered.”
· Hedge funds and money managers increased their net short position in COMEX gold contracts to another record in the week to Aug. 21, adding 1,306 contracts to bring it to 78,579 contracts, the largest since records became publicly available in 2006, data showed.
· “The market is extremely short and at some stage managed money shorts were likely to be buyers ... The rapidity of the move (on Friday) suggests the direction came from short covering,” ABC Bullion’s Frappell said.
Higher activity in gold options amid geopolitical tensions and a record-long bull market
· Among other precious metals, spot silver edged up 0.1 percent to $14.81 an ounce, while platinum was down 0.3 percent at $787.99. Palladium was flat at $936.50 an ounce after touching a one-month high of $940.50earlier in the session.
· On a technical basis, the price has upside has also moved into a brighter spot - above the descending resistance, the 21-D SMA and it has pierced into space through the prior daily support levels above 1204. to really convince a market that is otherwise heavily short of the gold and to reconsider its positioning, (net speculative short positions, or bets an asset’s price will fall, in gold are up 275% year to date), 1224 and then the 200-W SMA at 1233 are key. A retry of the downside should target 1146/22 monthly levels.
· Gold -0.15% finally had a green week and that too a big one with gains of more than $20 re-conquering the $1200 back after giving it up just last week. Catalyst to such a massive bar was the sizeable drop in the Dollar influenced by the Jackson Hole event where the Fed presented a dovish stance to the economic policy combined with views of the American president wanting a weaker dollar. Fundamentals played a key role in the switching of tracks of both gold -0.15% and dollar moving them in opposite directions of their existing trend.
On the chart –
Gold -0.15% saw a quick turnaround with prices gaining more than $20 rising well above $1200 thus creating more room for upside. Prices gliding through the resistances with so much of ease can only be due to panic and fear which was clearly present in last 14 days once on the downside then on the upside. Now the key is holding of the crucial $1200 level which would decide the fate of the gold -0.15% . We have 2 scenarios –
1. Gold -0.15% ended up above $1200 which is a great sign for further bullish moves. Till its held gold -0.15% can breathe easy with buyers emerging even in a bear market which gold -0.15% is still in technically. Once$1208 is taken out it can head higher to $1217. If this level is surpassed it can head towards the next resistance at $1228. Once this is conquered it can rally to $1243 where its bound to find huge resistance.
2. Short trades keep on fading till $1200 is held, they come alive if last week’s low is broken which will trigger fresh round of selling and should take the prices to a new low.
Bullish view – Bulls finally had their way after big gap of 10 whole weeks where they were sidelined. Prices erupted above $1200 as the dollar kept on crashing. It certainly is bullish the way it has closed above key resistances suggesting that more greenery is about to bloom 0.00% . This kind of price action can take the gold -0.15% higher to $1243 where lies the ultimate acid test.
Bearishness is for the moment contained as price action denotes the opposite trend.
On larger terms, Gold -0.15% has turned cautiously bullish and prices are expected to move higher.
Possible trades are on both sides, gold -0.15% can be bought above $1208 for the targets of $1217 and $1228 with a stop loss placed below $1198. Longer term target $1243.
Short trades are against the trend and not a good choice, it comes into play once last week’s low is broken.
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