Key Points:
- Highly bearish trend line.
- EMA activity remains bearish.
- Dynamic support could be broken.
Gold spent last week in decline as the appointment of a new UK Prime Minister helped to stabilise the markets, as did the notable improvements in the US economy which were reported in the US Beige Book. The combination of growing stability in the UK and an improving US economy now brings into question how long the metal can remain above the 1300.00 level. However, the commodity’s movements will largely be technical in the early stages of this week ahead of Thursday’s US economic report results.
Gold moved south in a relatively consistent fashion over the past week, a symptom of the return of some political stability in the UK and some improvements in the US economy. Specifically, Theresa May’s accession to the role of PM was well received by the markets and saw the VIX and Gold continue to subside over subsequent sessions. Later in the week, the release of the US Beige Book indicated that most areas in the US were showing some modest improvement, even if Inflation was not looking ready to surge just yet.
Looking to the technical analysis, Gold’s bullish trend looks to be on hold as it moves into a ranging phase. On the daily chart, the 12 and 20 day EMA’s are now moving into a sideways configuration which could limit upside potential. In addition to this, the combination of a bearish Daily Parabolic SAR reading and a Bullish H4 Reading show a degree of indecisiveness for the metal. Mirroring this sentiment, RSI is relatively flat which should see gold oscillate between the 1300.00 and 1375.00 handles over the coming week.
Going ahead, the metal will largely be looking to Thursday’s US Philadelphia Federal Manufacturing Index, Unemployment Claims, and Existing New Home Sales figures for any price movements. Weaker results in any of these indicators could help gold to remain afloat throughout the week but could likewise send it tumbling if they come in stronger than expected. However, keep an eye out for any more shifts in sentiment that could arise from news surrounding the ongoing Brexit saga.
Ultimately, in the absence of any further destabilising news events in the ongoing Brexit drama, Gold’s stint above the 1300.00 handle could be limited. With a new PM in the UK, modest growth in the US, and more recently, some promising results out of China, the yellow metal could be heading into a long term decline. However, keep watch on the technical indicators as they could keep gold somewhat buoyant in the coming week, which should result in a ranging pattern.