A relatively light week for economic data could leave gold in no man’s land and vulnerable to outside markets, particularly oil and the U.S. dollar, according to some analysts.
The gold market is preparing to end a two-week downtrend as it ends Friday in neutral territory compared to last week. August Comex gold futures settled the day at $1,256.40 an ounce, relatively unchanged from last Friday’s settlement price.
To the surprise of some analysts, gold has been fairly resilient as it has managed to hold initial support at $1,240 an ounce despite hawkish comments from regional Federal Reserve presidents -- most notably, New York Fed President William Dudley.
“The price action in the gold market is encouraging because gold was able to withstand hawkish central bankers,” said Adam Button, senior currency strategist at Forexlive.com.
Levels to Watch
With gold prices showing some resilience at $1,240 an ounce, analysts said that this is still just a moderate support level. They noted that the major support level to watch in the near-term is $1,230.
“If gold kicks below $1,230 an ounce then it raises the risk that the market drops to $1,200 an ounce,” said Button.
On the upside, Cieszynski said that he needs to see prices back above its 50-day moving average, which comes in around $1,260 an ounce, to signal a push back to $1,300.
“With so much uncertainty, I don’t think gold can break above $1,300 an ounce just yet,” he said. “I think we are entering a trader’s market for this summer and we could see prices swing between support at $1,230 and $1,300 an ounce. Right now, I am bullish on gold in the short-term strictly as a technical play.”
Chris Beauchamp, market analyst at IG Markets, said that with if gold holds $1,240 an ounce, he could see a push back to $1,280 in the near-term.
“It would take a move back below $1,240 to negate the positive outlook here,” he said.
The Final Say
While most investors and traders will be watching key outside markets next week, there are a few U.S. economic reports that could create some volatility for gold.
Monday, the markets will receive U.S. durable goods data for May, which are important as the report gauges the health of the manufacturing sector.
Also early next week, markets will receive consumer confidence data for June.
Markets will also be interested to hear what Fed Chair Janet Yellen has to say as she speaks at an event Tuesday in London. This will be the first time she speaks after her hawkish June 14 press conference.
Markets will also receive the final estimates for first quarter GDP.
Reference: Kitco
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