Kitco News, Mon. Aug 3rd, 2021) – The summer doldrums continue to weigh on gold as it is starting a new trading week under modest selling pressure. The precious metal is not finding any momentum from a weaker U.S. dollar or lower bond yields.
According to some analysts, after testing resistance at its 200-day moving average last week, the gold market is once again in a holding pattern. The precious metal is waiting for Friday ’s nonfarm payrolls report that could set the tone for the Federal Reserve and its potential plan to reduce its monthly bond purchase program.
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2924175530478188)
Although there is still some solid bullish sentiment in the marketplace, some analysts have said that they aren ’t ruling out a drop to $1,790 an ounce, which represents last month’s lows. December gold futures last traded at $1,811.20 an ounce, down 0.33% on the day.
At the same time spot gold last traded at $1,809.70 an ounce, down 0.23% on the day.
“The bullish bias is not over, but it is in pause mode for now,” said Matt Simpson, market analyst at City Index.
Margaret Yang, market strategist at DailyFX.com, said that she is also watching $1,790 an ounce in the near term.
“Technically, gold prices may be forming a ‘Double Top ’ pattern after failing to breach the 1,835 resistance for a second try. Immediate support levels can be found at 1,790,” she said. “The MACD indicator is flattening, suggesting that bullish momentum may be fading.”
Gold ’s continued lackluster price action comes as the U.S. dollar sees further weakness and U.S. bond yields continue to fall. Some currency analysts are looking for further weakness in the U.S. dollar in the near term.
“Markets are still trading off Powell ’s dovish press conference rather than the hawkish insertion of tapering in the official statement,” said currency analysts at Brown Brothers Harriman. “While we remain positive on the dollar, we acknowledge that the rally is unlikely to resume in force until a more hawkish Fed narrative takes hold. Perhaps this week ’s data will help on that front.”
At the same time, U.S. bond yields are trading near a two-week low, falling to 1.21%.
The gold market is also not seeing much support from the energy market as oil prices started the week down 1%. September WTI crude oil futures last traded at $73.00 a barrel.
Some analysts have said that although falling bond yields and a weaker dollar are bullish for gold, the precious metal continues to compete with historic momentum in U.S. equity markets. The S&P 500 is pushing to new record highs. Friday, the broad stock market index ended July with its sixth monthly gain in a row.
In a recent interview with Kitco News, Rob Haworth, senior investment strategist at U.S Bank Wealth Management, said that the economic recovery is a too compelling story for investors. He added that he expects equities to continue to outshine gold in the near term. The U.S. government continues to pump money to support the economic recovery. Congress continues to move forward with a $1 trillion infrastructure spending plan.
There are some significant economic reports being released this week, starting with ISM manufacturing data at 10 am ET; however, all eyes are on Friday ’s nonfarm payrolls report. According to consensus reports, economists are expecting that 895,000 jobs were created in July. Some economists have said that a substantial employment number could prompt the Federal Reserve to reduce its monthly bond purchases by the end of the year.
Posted by :
Jack Dempsey, President
401 Gold Consultants LLC
jdemp2003@gmail.com