(Kitco News) – The resilient strength in the gold market, a surge in prices due to significant support, is creating some optimism that the precious metal is set to break its chains and push higher next week.
December gold futures were trading at $ 1,947 an ounce, up nearly 2% over the previous week.
“Last week, we were testing support on the 50-day moving average and now we are challenging the 20-day moving average on the week,” said Charlie Nedos, senior market strategist at LaSalle Futures Group. “I think the path of least resistance is up.”
Nedos said he would like to see gold prices above $ 1,954 a week. He said eventually the uptrend is still intact as prices are above $ 1,941 an ounce.
Analysts say rising inflationary pressures continue to stress real yields, a positive environment for gold; However, on the other hand, some analysts have said that in the near term, investors need to focus on the strength in the US dollar index.
“The US dollar has gained a foothold and will make it difficult to acquire gold in the near term,” said Adam Button, chief currency strategist at ForexLive.com.
How to trade gold that has nowhere to go
With gold-stacked neutral and falling volatility, Darin Newsom President of Darin Newsom said that now is a good time to play in the options market.
“You want to buy options when volatility is low and sell options when volatility is high. Right now, gold neutralizes volatility,” he said.
Newsome said he is bearish on gold because the technical chart looks heavy; However, he said that investors cannot ignore the fact that gold is also a significant backing in flexible equity and a strong dollar environment.
“A market that cannot go down will not go down.” There is something that is holding the price and I think it is all the tension and uncertainty in the market, ”he said.
Due to its bearish bias, Newsom said it preferred the idea of buying the December Put option around $ 1,900 or $ 1,910. He said his negative target for gold is at a four-week low of $ 1,874.
He said investors have limited risk with the put option if the price breaks upwards.
All eyes on the Fed
Analysts say the market sentiment until next week will depend on the latest action by the Federal Reserve as it conducts a monetary policy meeting. This would be the first meeting for the central bank when the committee announced its new inflation target for the average 2%.
Many analysts have said that the Federal Reserve’s new inflation target and its focus on boosting full employment create a long-term uptrend in gold.
Commodity analysts at TD Securities said they expected the Federal Reserve to repeat its over-aggressive stance.
Analysts said in a report that we expect next week’s FOMC to remove a second hurdle for yellow metal bulls – officials should send a signal of dovish via an acronym on QE, dot plot expanded to 2023 and chairman’s press Should do in conference. Friday. “Over time, this will open the door to an expansion in the average maturity of treasury purchases, which should further support precious metals. In this context, we argue that the trading set-up in precious metals is ripe for breakouts.”
Economists from Nomura note that while they are not expected to see any major monetary policy announcements next week, the meeting will be important as the central bank will release its updated economic projections, including forecasts for 2023.
“We believe the September meeting will include discussion on major long-term topics, but announcements for major policy innovations will have to wait until later this year,” economists said.
However, many gold analysts have said that investors should ignore the more subtle message of the Federal Reserve and focus on the bigger picture, which is not going to hit interest rates anytime soon. Real interest rates are going down, with inflation expected to stick to higher levels.
“Realistically, interest rates are going to be negative,” said James Steel, chief metals analyst at HSBC. “Having a non-yielding asset like gold becomes more attractive in the current environment of lower interest rates.”
In addition to the US Federal Reserve meeting, the dock of economic data in the US will be relatively light next week. Regional manufacturing sentiment data and retail sales for August are expected to cause some volatility for the markets.
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