· Gold prices slipped on Monday due to a stronger U.S. dollar and a recovery in equities, as hints of more stimulus from major central banks around the world eased concerns about a recession.
Spot gold was down 0.4% at $1,507.11 per ounce at 0602 GMT.
U.S. gold futures fell 0.5% to $1,515.70 an ounce.
· “The dollar is getting stronger, and given that gold had a very good rally over the last few weeks, we are just seeing some profit-taking coming in,” said OANDA analyst Jeffrey Halley, adding that the recovery in equities is somewhat fragile and gold looks constructive.
The dollar index, against a basket of six major currencies, hovered near a two-week high reached on Friday, making greenback-denominated gold costlier for investors holding other currencies.
The 10-year U.S. Treasury yield pulled away from a three-year trough hit last week.
· Asian stocks on Monday tracked a rally on Wall Street, with support from a move by China’s central bank to change the way a key interest rate benchmark is set, which is seen reducing borrowing costs for companies.
Spot gold has gained 19% so far since falling to the year’s low of $1,265.85 in May.
“There is still plenty of interest to buy gold on any dips as a hedge against uncertainty in the global economy,” Halley said.
U.S. President Donald Trump said on Sunday he was “not ready to make a (trade) deal yet” with China, hinting that the White House would like to see Beijing resolve ongoing protests in Hong Kong first.
· Investors are now awaiting the U.S. Federal Reserve’s Jackson Hole symposium this week to get greater clarity on the future path of interest rates. Traders see about a 71% chance of a 25 basis-point cut in September.
· “The precious metal though easing up on bullish gains from U.S. dollar vigour will remain supported over subdued global growth and accommodative monetary policy by global central banks,” Phillip Futures analyst Benjamin Lu said in a note.
Spot gold still targets a range of $1,483-$1,503 per ounce, as suggested by its wave pattern and a retracement analysis, said Reuters technical analyst Wang Tao.
· SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.10% to 843.41 tonnes on Friday.
· Hedge funds and money managers trimmed their bullish stance in COMEX gold and cut net long positions in silver contracts in the week to Aug. 13, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.
· "I think now is the time for the gold market to take a breather, but maybe not a long [one]," said Jasper Lawler, head of market research at the London Capital Group. "Central banks are on the cusp of devaluing their currency, and that will be good for gold."
For many analysts the main driver for gold going higher will be falling bond yields, a trend that is not expected to end anytime soon. According to many analysts, there is now a race to the bottom among global central banks after the Finnish central bank governor, Olli Rehn, raised the prospect of new easing measures from the ECB.
· Richard Baker, editor of the Eureka Miner Report, noted that gold rose to new multi-year high against the euro this past week.
"With increasingly negative bond rates in Europe and Japan, gold at zero yield remains a good deal," he said. "The 10-year real rate actually dipped slightly negative this week -- even with falling inflation expectations -- making the cost of holding gold very cheap in the U.S."
· Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, said that even with gold's recent rally, there is enough pent up demand to drive prices higher in the near-term.
"Many investors are feeling that some hedge is called for in the current circumstances—an easy Fed, a volatile stock market, Hong Kong protests," he said. "If one is putting a small amount of a portfolio into gold as insurance, then the price is less important."
· Mark Leibovit, publisher of VR Metals/Resource Letter, said that he is bullish on gold, but he is looking for a pullback.
· Gold technical analysis: Under pressure after bearish outside day, eyes sub-$1,500 levels
Gold is currently trading at $1,508 per Oz, representing a 0.29% drop on the day.
The yellow metal created a bearish outside day candlestick pattern on Friday, which occurs when the trading range engulfs preceding trading day's high and low.
That candlestick pattern is considered an early sign of bullish-to-bearish trend change, especially if it appears following a notable rally, which is the case here.
Further, the 4-hour chart shows a bearish divergence of the relative strength index (RSI) and a rising channel breakdown.
Hence, a pullback to the Aug. 13 low of $1,480 looks likely. The bearish case would weaken if prices find acceptance above Friday's high of $1,528.
· GOLD PRICE FORECAST: RSI SELL SIGNAL TAKES SHAPE
The near-term rally in gold appears to have stalled as the US delays the next tranche of China tariffs to December 15, and the price for bullion may continue to pullback from the yearly-high ($1535) as President Donald Trump tweets ‘we are doing very well with China and talking.”
Fears of a US-China trade war may continue to abate as the two regions reengage in negotiations, but little signs of a looming trade deal may push the Federal Open Market Committee (FOMC) to insulate the US economy as “weak global growth, trade policy uncertainty, and muted inflation have prompted the FOMC to adjust its assessment of the appropriate path of interest rates.”
It seems as though the Federal Reserve will continue to change its tune over the remainder of the year as the central bank pledges to “act as appropriate to sustain the expansion,” and the FOMC Minutes due out later this week may hint at a more accommodative stance as “many Committee participants saw that the case for lowering the federal funds rate had strengthened.”
In turn, Fed Fund futures continue to reflect a 100% probably for at least a 25bp reduction at the next interest rate decision on September 18, and the FOMC may come under increased pressure to implement a rate easing cycle as President Trump insists that “the Fed is holding us back.”
Keep in mind, the broader outlook for gold prices remain constructive as both price and the Relative Strength Index (RSI) clear the bearish trends from earlier this year.
Moreover, gold has broken out of a near-term holding pattern following the failed attempt to close below the $1402 (78.6% expansion) region, with the RSI still tracking the bullish formation from April.
However, recent developments in the RSI warn of a larger pullback as the oscillator falls below 70 and flashes a textbook sell signal.
In turn, a break/close below $1488 (61.8% expansion) opens up the $1467 (50% expansion) hurdle, with the next area of interest coming in around $1457 (100% expansion).
Will keep a close eye on the former-resistance zone around $1444 (161.8% expansion) to $1448 (382.% retracement) for potential support.
· Meanwhile, silver eased 0.6% to $16.99 per ounce.
· Platinum rose 0.5% to $848.54 an ounce, and palladium climbed 0.2% to $1,450.55 an ounce.
Reference: Kitco, Reuters, FX Street, Daily FX
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