Key Talking Points:
- Gold remains stuck around 1,800 despite bullish variables
- NFP data in focus for further guidance on Fed positioning
The price of gold (XAU/USD ) is once again trapped in a tight 15 point range after a failed attempt to break higher last week. The precious metal has been trading around the same levels for the past month and has only seen two attempts to break out of range in that time, and even then only managed to climb 20 pips before being brought back down.
XAU/USD Daily chart
Gold had been acting as a hedge against central bank inaction and had managed to pick up some momentum during the months of April and May, but an array of more hawkish messages from Fed speakers has left the precious metal without some of its shine, mostly just tracking along and stepping either side of the 1,800 mark.
The neutral Fed stance so far hasn’t boded well for the US Dollar and with real yields hovering around record lows I would have expected gold to see a little more excitement as these two variables have made the outlook more bullish.
Looking ahead, we have Fed vice-chairman Clarida speaking this afternoon with focus on the US economic outlook and monetary policy. Investors will be looking for some further guidance on the Fed’s outlook heading into the Jackson Hole symposium this month, with expectations that Clarida will reaffirm Powell’s message about the economy still having output and employment gaps that need to be filled before any action is taken. This comes after Fed member Waller took a sharp turn from being a dovish member as he signaled that he was ready to see the central bank start tapering on the back of rising inflation concerns. His key measure will be the jobs market and he would like to see tapering start as early as October if the next two jobs reports show employment rising by 800,000 or more. There will be increase focus on this Friday’s NFP report as the job market has been pointed out as a key metric in numerous occasions.
XAU/USD Monthly chart
Despite a positive run in July, XAU/USD continues to be far off its 6-month highs seen at the end of May after the precious metal saw its worst monthly performance in four-and half years in June. Momentum stalled at the 38.2% Fibonacci (1,836) and the three trading days of August have provided little direction so far. I wouldn’t be surprised if XAU/USD remains within its Fibonacci range (1,762 – 1,836) during the month although a break lower may be on the table if we see a more hawkish Fed lifting US Dollar momentum.
Fibonacci Confluence on FX Pairs
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--- Written by Daniela Sabin Hathorn, Market Analyst
Follow Daniela on Twitter @HathornSabin
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