Gold prices have declined steadily since Tuesday this week amidst the Jackson Hole Symposium. Market participants are not willing to put too much at stake and are just waiting at the sidelines for the next market catalyst.
The speech from Fed’s chairman Jerome Powell will be live-streamed to the public as the event is taking place virtually this year due to coronavirus concerns. Jackhole Hole symposium will most likely set the tone for the markets for the final few months of the year. In the event of an inconclusive outcome, the Fed’s meeting and NFP next month can provide more solid grounds.
The key thing that most investors care about would be signals of tapering and hawkish statements from the Fed, if any.
Looking at the bigger picture, inflation concerns should boost gold prices, or provide solid support at least. Meanwhile, an almost certain tapering in the near future and gradually hawkish stance from the Fed are weighing gold prices down.
Therefore, gold may decline in the short term when the effect of tapering starts to kick in and bond yields increase. Later, gold may rise due to higher inflation expectations and higher demand for a hedge against inflation.
From a technical point of view,
Chart 1: Gold Daily Chart
The first thing that caught our attention is the death cross by the 50 SMA and 200SMA and the price is currently trading below both of the SMAs. Gold was mostly trading in between the $1760 and $1830 zone, other than the “flash crash” on the 9th of August. Although it recovered swiftly, the 50 SMA proved to be a tough resistance to the upside.
Taking both fundamental and technical analyses into account, gold could be heading south with the bears in the coming months and test the 1680 area again.
A friendly reminder to those who are involved in trading the yellow metal, please be cautious as there might be volatile movements over the weekend as the symposium progresses.
Let us know your thoughts in the comments section below.