Gold (XAU/USD) News and Analysis
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Gold Prices Coil into a Range During a Week that Lacks High Impact Data
Gold prices dropped rather sharply on Friday as a much hotter than expected NFP report sent the signal that despite increasingly tight financial conditions, the labour market refuses to roll over. Better than expected labour data usually leads to a lift in rate hike odds but the Fed’s communication of a “skip” at this month’s FOMC meeting means that markets still anticipate rates to remain where they are.
Given that this week brings with it little in the way of high impact economic data, gold prices have been seen drifting within the broader range of 1937 and 1985 and very much in search of its next directional move. A bipartisan agreement to suspend the debt ceiling has reduced the appeal of the safe haven metal in recent trading sessions but the precious metal is yet to show signs of a prolonged sell-off. Next week’s US CPI and FOMC decision are all but set to inject volatility back into the market. If core inflation breaks below the stubborn 5.5%, that could aid the narrative of a more dovish Fed in the coming meetings, lower dollar – which could continue to provide support for gold prices.
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Gold daily chart
Source: TradingView, prepared by Richard Snow
Broader Uptrend Remains Despite Softer Gold Prices
On the weekly chart gold prices remain within the ascending channel, meaning even if prices ease further bears could find resistance nearby. A bullish continuation remains constructive upon a weekly close above 1956.
Gold Weekly Chart
Source: TradingView, prepared by Richard Snow
Ranging markets tend to be characterised by a low volatility environment and indeed gold volatility has been seen declining. The chart below shows gold volatility over time which now approaches multi-month lows.
GVZ – gold volatility index
Source: TradingView, prepared by Richard Snow
— Written by Richard Snow for DailyFX.com
Contact and follow Richard on Twitter: @RichardSnowFX
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