Weekly Fundamental Gold Price Forecast: Neutral
- Gold prices had a comparatively tame week regardless of sharp losses on Friday. More regarding is the renewed push greater by actual yields in developed economies.
- The financial calendar is quiet in the beginning of the week, busiest on Wednesday, then tapers off once more into the August US jobs report on Friday.
- The IG Client Sentiment Indexmeans that gold costs in USD-terms (XAU/USD) have a bearish buying and selling bias.
Gold Prices Week in Review
Despite the Federal Reserve’s Economic Policy Symposium that sparked volatility throughout asset lessons, gold costs had a comparatively tame week general. Gold in USD-terms (XAU/USD) fell by -0.74%, the worst performing gold-cross among the many majors. Among the losers, gold in JPY-terms (XAU/JPY) dropped by -0.09%, whereas the worst performer was gold in AUD-terms (XAU/AUD), which sank by -0.75%. On the upside, gold in EUR-terms (XAU/EUR) led the way in which greater, notching a modest acquire of +0.24%, adopted by gold in GBP-terms (XAU/GBP), up by +0.17%.
But gold costs’ positive factors had been curtailed on Friday after Fed Chair Jerome Powell made clear that fee hikes will proceed to happen over the approaching months – as did different central bankers at Jackson Hole. The fast impact on Friday was an increase in sovereign bond yields (not restricted to US Treasury yields) and a decline in inflation expectations throughout developed economies, curating a push greater in actual yields globally. If actual yields proceed to climb, then gold costs will face tougher buying and selling circumstances within the fast future.
Economic Calendar Week Ahead
The closing days of August and early days of September will function a smattering of progress, inflation, and jobs information from Europe and North America. The calendar is comparatively quiet initially of the weak, most dense on Wednesday, after which tapers off once more into the tip of the week.
- On Tuesday, gold in EUR-terms (XAU/EUR) can be in focus when the preliminary August German inflation report (HICP) is launched at 12 GMT. Gold in USD-terms (XAU/USD) can be within the highlight at 14 GMT, when the August US Conference Board client confidence studying is due.
- On Wednesday, gold in CNH-terms (XAU/CNH) ought to show unstable when the August China NBA manufacturing PMI is revealed at 1:30 GMT. Gold in EUR-terms is again in focus when the preliminary August French inflation report (HICP) comes out at 6:45 GMT, adopted by the August German unemployment change and unemployment fee at 7:55 GMT, then preliminary August Italian inflation report (HICP) and the flash August Eurozone inflation report (HICP) at 9 GMT. Gold in CAD-terms (XAU/CAD) will garner consideration at 12:30 GMT, when the 2Q’22 Canada GDP report is launched.
- On Thursday, September 1, gold in EUR-terms is again in focus when the ultimate 2Q’22 Italian GDP report is due at 9 GMT. Gold in USD-terms is again within the highlight at 14 GMT with the discharge of the August US ISM manufacturing PMI report.
- On Friday, September 2, gold in USD-terms is again in focus for the ultimate time, with the discharge of the August US nonfarm payrolls report and unemployment fee scheduled for launch at 12:30 GMT.
GOLD PRICE VERSUS COT NET NON-COMMERCIAL POSITIONING: DAILY TIMEFRAME (August 2020 to August 2022) (CHART 1)
Next, a glance at positioning within the futures market. According to the CFTC’s COT information, for the week ended August 30, speculators decreased their net-long gold futures positions to 127,603 contracts, down from the 144,036 net-lengthy contracts held within the week prior. The futures market is now the least net-long over the previous month.
IG CLIENT SENTIMENT INDEX: GOLD PRICE FORECAST (August 26, 2022) (CHART 2)
Gold: Retail dealer information reveals 84.82% of merchants are net-long with the ratio of merchants lengthy to quick at 5.59 to 1. The variety of merchants net-long is 0.60% decrease than yesterday and 4.84% greater from final week, whereas the variety of merchants net-short is 17.45% decrease than yesterday and 32.90% decrease from final week.
We sometimes take a contrarian view to crowd sentiment, and the very fact merchants are net-long suggests Gold costs could proceed to fall.
Traders are additional net-long than yesterday and final week, and the mixture of present sentiment and up to date adjustments offers us a stronger Gold-bearish contrarian buying and selling bias.
— Written by Christopher Vecchio, CFA, Senior Strategist