Gold Outlook: The Bulls continue to reign over the precious

The upward movement of gold’s price continued since last week, following the release of the US June CPI rates. The continued weakening of the USD following the lower than expected CPI rates, allowed Gold to capitalize and move to higher ground. In this report, we aim to shed light on the catalysts driving gold’s price, assess its future outlook and conclude with a technical analysis.

The US CPI data

The rise of gold’s price was all but evident during last Wednesday’s trading session, when the US CPI rates where released. The US CPI rates, where indicative of easing inflationary pressures in the US economy, coming in lower than expected by market analysts, jolted the bullion market, as the greenback further weakened. The lower than anticipated CPI rates, could be perceived ,as an indication that the Fed’s ambitions of continuing to hike interest rates in 2023 , could be reaching a slight snag ,by challenging the banks resolve to continue on its current rate hiking path in the face of easing inflationary pressures. 

Therefore, the possibility of fewer hikes in the future, weakened the greenback and as such allowed Gold to capitalize, once again highlighting their inverse relationship. Lastly we highlight the release of the US Core retail sales rate which at the time of this report have not been released. In the event that the Retail sales come in lower than expected, we may see the precious further capitalizing on a weaker greenback, whereas should they come in as expected, it may provide support for greenback and as such weakening the price of the precious metal.

UAE suspends one of it’s biggest gold refineries

According to Bloomberg, the UAE has blocked one of its largest gold refineries from delivering into Dubai’s Gold bullion market. Interestingly enough, on the Emirates Gold website, the statement release by the company, claims that this is only a temporary suspension of its UAE Good Delivery accreditation and that the situation will be rectified, in addition to stating that they have not lost their trading license.

Nonetheless, should the “suspension” be prolonged well into the future, we may see a reduction in the overall supply of gold being released to into the market, as their refining capacity is taken out of action, that means less can be processed and released into the market. Resulting to potential shortages in the long run, which may provide a minor form of support in the price of gold, given a scaling down of a process in the supply chain. However, despite the interesting development, we do not expect this to take a predominant role in guiding the price of the bullion.

The return of the Gold standard?

Various media outlets have been heavily reporting that Russia via RT, a government owned news broadcasting agency, has confirmed that the BRIC’s nations will be discussing the adoption of a common currency that will be backed by gold, during their next summit in August. In the event, that this is formally confirmed by the group during their official summit, it may have a significant impact on the price of the precious, as the return to the gold standard, similar to that of the Bretton Woods system, could drastically increase the price of gold.

A gold backed BRIC’s currency could lead gold to new all-time highs, based on the fact that following the removal of Russia from the SWIFT banking system, many countries have started to look for alternatives to the greenback, which is currently  the worlds reserve currency. Therefore, by re-introducing the gold standard it may set the stage for further nations to “ditch” the greenback in favor of a gold backed currency, which may have less volatility and economic ties to the dollar, thus potentially sending the price of gold higher.

テクニカル分析

XAUUSD 4時間チャート

• Support: 1950 (S1), 1929 (S2), 1910 (S3)
• Resistance: 1963 (R1), 1993 (R2), 2021(R3)

On a technical level we note despite gold moving in a sideways like fashion the past few days, it would now appear it is moving in an upwards fashion, as it is currently testing resistance at the 1963 (R1) level. We maintain a bullish outlook for gold’s price and supporting our case is the RSI indicator below our 4-Hour chart currently registering a figure near 70 , implying a strong bullish market sentiment, in addition to the upwards moving trendline formed on the 29    of June.

For our bullish outlook to continue, we would like to see a clear break above the 1963 (R1) resistance line, in addition to a clear break above the 1993 (R2) resistance level, with the next possible target for the bulls being the 2021 (R3) resistance ceiling. On the other hand, for a bearish outlook, we would like to see a clear break below the 1950 (S1) support level, with the next possible target for the bears being the 1929 (S2) support base.

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