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After yesterday’s moderate bullish movement bringing gold above $ 1,800, technical selling pressure caused gold to fall below $ 1,800. Yesterday, the Bureau of Labor Statistics released its inflation report for August, indicating that the CPI (consumer price index) rose 0.3% last month. The rise in inflationary pressures in August was lower than estimates by economists polled by the Wall Street Journal, who expected an increase of 0.4%. The Bureau of Labor Statistics report said inflationary pressures are still prevalent and remain at a high level, pushing the CPI index to 5.3% in the past 12 months.
Today’s massive sell-off appears to have been the result of technical selling pressure. The fact that gold closed just below its 200-day moving average yesterday, which is the first level of technical resistance, and opened below that price today was enough for short-term traders to understand. To take advantage of.
Reuters reported that David Meger, director of metals trading at High Ridge Futures, said: “There weren’t any particular headlines to cause gold to pull back and it was rather due to its” technical inability to cross the 200-day moving average on Tuesday. ”Meger added that“ all good news is bad news for gold, ”and if more positive economic data comes out, the Fed would be more willing to start cutting back on buying assets, and gold is likely to move sideways ahead of the FOMC meeting.
Gold continues to be in a range and may continue to trade sideways until the conclusion of the Federal Reserve’s September FOMC meeting on the 22nd of the month. Market participants are waiting for more clarity on the Federal Reserve’s timeline to start shrinking. Currently, it is believed that the Fed will not announce the start of tapering until the FOMC meeting in November. One unique item that market participants will focus on and gain insight into from this month’s FOMC meeting is the release of a revised dot plot, which will include forward interest rates (Fed funds rates). ) until 2024.
Given that we have seen gold give way to gains from yesterday’s move above $ 1,800, the risk for any major pursuit of the sell is limited. Saxo Bank analyst Ole Hansen said: “Gold’s downside risk is also limited as slowing inflation thus reduces the rate at which tapering can be done.”
The only thing that seems overwhelmingly clear is that traders and market participants are awaiting further information from the Federal Reserve when the FOMC meeting concludes exactly one week from today. Until then, we could see gold trading sideways and consolidating just below or just above $ 1,800 an ounce.
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Wishing you, as always, good exchanges and good health,
Disclaimer: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. It is not a solicitation to effect an exchange of commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for any loss and / or damage resulting from the use of this publication.
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