Gold Price Bounce, Rebound in Questions Ahead of US GDP
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Fundamental Forecast for Gold:Bearish
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Gold Price Falls from Two-Week High, Oil into ST Price Support
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Gold prices were on a firmer footing this week with the precious metal up 1.15% to trade at 1265 ahead of the New York close on Friday. The gains come despite continued strength in the greenback with the USD Index (DXY) rallying back into the 2016 open at 98.69 (highest levels since February). The rebound in bullion is likely to be short-lived however as the technical outlook continues to suggest that further losses are likely before registering a more significant low in price.
Highlighting the economic docket next week is the advanced read on U.S. 3Q GDP with consensus estimates calling for an annualized print of 2.5% q/q. The Core Personal Consumption Expenditure (PCE) will be of particular interest with market expectations calling for a slowdown to 1.6% q/q from 1.8% q/q. Keep in mind that this is the Fed’s preferred gauge of inflation and a softer than expected print could weigh on expectations for a 2016 rate hike. As is stands, Fed Fund Futures are pricing in a 68% likelihood the central bank will hike in December. Look for advances in gold to remain limited as the prospect of higher interest rates weigh on demand for the yellow metal as a store of wealth.
A summary of the DailyFX Speculative Sentiment Index (SSI) shows traders are net long Gold- the ratio stands at +2.02 (67% of traders are long)- bearish reading. Long positions are 5.4% below levels seen last week while short positions are 30.1% higher over the same time period. The pullback in long exposure softens the strength of the bearish signal and while the broader risk remains lower, the recent dynamic suggests prices may continue to consolidate in the near-term before resolving this range into a new low.
Gold Daily
The technical outlook remains unchanged from last week as prices “close the week above near-term support at 1249 - a region is defined by the 38.2% retracement of the advance off the December low and the median-line extending off the May high. A break below this level targets the highlighted median-line confluence (~1220) backed by key support at 1204/10,” (area of interest for possible long-entries).
Initial resistance is eyed at former median-line support ~1284 with our bearish invalidation level now back at 1303. From a trading standpoint, I would be looking for this rebound to fade into more meaningful structural support where prices could mount a more aggressive counter-offensive.