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The wait has been long, but gold bull gold investors have finally managed to run all the fundamentals to fuel a strong recovery. The move actually began the previous week when aggressive speculative buyers reached $ 1274.60 to successfully defend the low of the year at $ 1273.20.
Several days of consolidation followed, as investors witnessed the fall in Treasury yields and the fall in stock market indexes to lows of several months. In general, these events are bullish for gold, but gains were limited by a strong US dollar index, which was close to a two-year high.
The final piece of the bullish puzzle came Friday after President Trump promised to put a tariff on imports from Mexico. The news shocked the financial markets as traders were predicting a recession later in the year. This news, coupled with concerns about low inflation, a Chicago PMI index ratio lower than expected and a drop in consumer confidence, has led to a wave of buyers, investors increasing their bets on a reduction in central bank rates later in the year. Events have been bearish for the US dollar, while increasing foreign demand for gold denominated in dollars.
For the week in August, Comex gold is set at $ 1311.10, up $ 21.90 or 1.70%.
Weekly forecasts
I like to avoid using the terms "buy refuge" or "commerce of fear" when talking about gold. I think the term lacks respect for gold players because the precious metal is an investment and is subject to the same supply / demand factors as any other investment like stocks. Investors do not buy gold because they "fear" something. They buy it because they see an opportunity for the metal to appreciate. As with any other badet, the conditions must be met for the appreciation to begin.
Gold traders recognized the value two weeks ago when gold hit its lowest level for the year. The market has not just flip-flopped. The buyers took their time and accumulated gold in anticipation of a rally. This is good because the height of any exchange is often determined by the length of the support base.
In my opinion, the main driver of the rally is not the fear, but the increase in bets on a reduction in the Fed's rate. Gold traders have begun to anticipate the Fed's move, but Trump's decision to impose a tariff on Mexico has likely reinforced the rate cut in the eyes of speculators on gold.
As traders are banking on rising rates, they will need the help of economic data to stay on course. Regarding the global economic downturn, investors will hold Sunday's report on the Caixin Manufacturing PMI for China. It is planned at 50.0. The price of gold could rise if the number is less than 50. In the United States, traders will have the opportunity to react to the PMI ISM Manufacturing on Monday. It should enter at 53.0. The closer this number gets to 50.0, the better the price of gold will be. The non-manufacturing PMI of ISM Wednesday is expected to reach 55.6.
The main report is Friday's report on non-farm wages in the United States. This report is important because the Fed maintains stable rates because of a strong labor market and moderate inflation. A bearish report will likely be favorable to gold prices.
We may not see the impact of the new tariffs on China or Mexico before the release of the June report, but traders will be looking at May's report for failings in the labor market.
Gold should continue to rise if treasury yields continue to weaken, equities remain under pressure and the US dollar lower. Essentially, these factors must continue to decline or gold prices may be limited. If we are at the very beginning of the next bull market in gold, we will have to face a lot of stops and starts, as shorts continue to be bought and buyers come in to buy the lows.
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