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Gold Ahead of Important US Releases

July 30, 2014 at 13:34 by Vladimir Vyun

Gold’s movement was subdued this week as traders were bracing for important reports from the United States. Volatility will likely start increasing today as data begins to come out. Let us consider what impact US indicators might have on the precious metal in a near term and what to expect from the bullion in a longer term.

Two of the major releases have already come out today, and they were not in sync. One of them was gross domestic product report that showed growth. It was expected that GDP would rise 3.1 percent in the second quarter of this year after falling 2.1 percent in the first quarter, but it turned out that the growth was even faster – at 4.0 percent.

Second important release was the employment report from Automatic Data Processing, and it was not as good as was expected. While experts predicted that US employers would add 234,000 jobs in July, actual employment growth was at 218,000. More important employment data will be released later this week in form of nonfarm payrolls. A moderate increase by 230,000 is expected.

It is important to understand how US economic data may influence gold. It so happens that performance of the precious metal has strong inverse correlation with the dollar. It means that reports that are positive for the greenback are negative for the bullion and vice versa. So far, fundamentals were mostly bad for the metal.

Another important event that will happen today is the Federal Reserve monetary policy announcement. Usually, it has a big impact on gold’s performance, but lately traders were demonstrating muted reaction to the news as the Fed continues to reduce stimulus with steady pace, providing no surprises. Market participants pay more attention to comments of Fed members, and this month’s meeting will not be accompanied by a press-conference, meaning that the policy announcement should not have big impact on the precious metals market.

Most analysts were neutral on gold ahead of this week’s reports, preferring to wait for the metal’s reaction on the news. DailyFX said:

From a technical standpoint, gold remains vulnerable below key resistance at $1321/24 with more definitive support at $1292/93.

Over longer term, the outlook is grimmer for gold bulls. ABN AMRO Group was rather bearish for the precious metal in its Quarterly Commodity Outlook, believing that prospects for higher interest rates in the United States and absence of inflationary pressure will not allow the metal to retain its performance, which has been relatively good thus far. It is expected that the medium price for gold will be at $1,200 over the next three months.

If you have any questions and comments on gold today, use the form below to reply.

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