Gold Prices May Rise As US GDP Downgrade Cools Fed Rate Hike Bets
Gold prices continued to mark time, waiting for a fresh catalyst after briefly spiking to a six-week low earlier in the week. The spotlight now turns to a revised set of US GDP figures, which are expected to confirm prior estimates showing the economy expanded at an annualized rate of 1.2 percent in the first quarter.
Broadly speaking, US economic news-flow has continued to deteriorate relative to consensus forecasts since the GDP print was last updated in late May. That opens the door for the possibility of a downgrade. Such a result may dim prospects for another Fed rate hike in the near term, boosting the yellow metal.
Crude oil prices surged even as EIA inventory flow data showed raw-material stockpiles added 118k barrels last week. That seemingly negative bit of news was foreshadowed in yesterday’s analogous API data and seemed to be shrugged off.
Rather, traders focused on an unexpectedly large gasoline storage outflow of 894k barrels. Consensus forecasts envisioned a far smaller 288.6k draw. This seemed to fuel hopes for firming demand for refined product that may help accelerate absorption of the global crude supply glut.
A lull in relevant event risk may translate into consolidation over the day ahead. Soft US GDP figures may apply a degree of downside pressure but that may be offset by US Dollar weakness amid cooling Fed rate hike speculation. The next major directional push may have to wait for now.
GOLD TECHNICAL ANALYSIS – Gold prices continue to consolidate after testing a six-week low but positive RSI divergence hints a bounce may be ahead. Near-term resistance is marked by the 23.6% Fibonacci expansion at 1263.22, with a daily close above that targeting the 38.2% level at 1280.05. Alternatively, a reversal below chart inflection point support at 1241.20 clears the way for testing a rising trend line at 1231.74.
Chart created using TradingView
CRUDE OIL TECHNICAL ANALYSIS – Crude oil prices pushed through key resistance at 43.79 (May 5 low, channel floor support-turned-resistance), opening the door for a challenge of 45.32 (May 4 bottom). A daily close above that exposes 47.12 (March 14 low, channel mid-line). Alternatively, a move back below 43.79 paves the way for a retest of the June 21 lowat 42.03.
Chart created using TradingView
The above article says:
>"Gold prices continue to consolidate after testing a six-week low but positive RSI divergence hints a bounce may be ahead.
>Near-term resistance is marked by the 23.6% Fibonacci expansion at 1263.22, with a daily close above that targeting the 38.2% level at 1280.05.
>Alternatively, a reversal below chart inflection point support at 1241.20 clears the way for testing a rising trend line at 1231.74."
Here's what other authors have been saying about the future price movement in gold:
1. Orbex says in its latest article on TalkMarkets (www.talkmarkets.com/.../two-scenarios-for-gold-rally-or-deeper-retracement):
>Is Gold about to rally from here? There are two possible scenarios:
First is a spike from here, given the fact that the US Dollar Index is suffering below 96.0 areas.
The second scenario would be a deeper retracement with a break of its trend support. This could lead to another leg lower, probably toward 1224, which would be the first immediate support followed by 1216.
The bullish outlook remains unchanged as long as gold continues to trade within the higher lows formation. Otherwise, gold would be at risk to visit 1220 once again."
2. AG Thorson contends in a TalkMarkets article (www.talkmarkets.com/.../metals-and-miners-are-bouncing) that:
>A breakout in the dollar should lead to a 1-3 month rally. Precious Metals and Miners are expected to descend into their 6-Months lows as this occurs...Prices could rally a bit more, but the bounce should finish this week. Once complete, we should see a breakdown below the intermediate trendline.
3. Jordan Roy-Byrne in a TalkMarkets article (www.talkmarkets.com/.../gold--gold-stocks-nearing-a-big-move) says:
>Until Gold breaks $1300 and GDX retests $25 the bias for the next big move...should remain to the downside. That is why we remain cautious.
4. Hubert Moolman illustrates that fact in a graph in an article (www.munknee.com/gold-chart-says-a-massive-move-up-or-down-is-imminent/) that shows that:
">Gold is currently trading near a critical 6-year resistance line that the gold price has to overcome, for the continuation of the gold bull market but, since price has now failed more than four times at the line, there is a great chance that we could see a big drop...When gold breaks through the resistance line, however, we will see a gold rally like that of 1979/1980.
5. Sean Brodrick looks at it slightly differently but comes to the same conclusion, more or less, saying in www.munknee.com/this-could-be-the-most-important-gold-pullback-ever-to-consider-buying-into-heres-why/ that
>IF gold breaks support...then you should buy gold and miners with both hands because that will likely mark the beginning of the next Mega Bull trend. The market won’t really turn bullish on gold again, however, until it pushes up through $1300."
I'd like to hear from anyone who would like to expand on what Alp, Orbex, Thorson, Jordan, Hubert or Sean have had to say.
Is this a turning point? Is gold about to plummet further to its 6-month low or is this the beginning of a new gold bull?
Thanks for sharing