GOLD PRICE VIEWS:
- Gold prices fought up after the Jackson Hole rally
- The US Jobs Report could weigh on gold if wage inflation continues to persist
- RSI discrepancies suggest an increase in August, which may be followed by a decline
The price of gold marked a time this week roared higher after the Jackson Hole symposium. Traders seem to have described the speech by Federation President Powell as “terrible”, in which he separated QE from the rise in interest rates since the start of the asset purchase cut, saying the latter will be far away even if the former may need to start this year.
The lack of follow-up seems eloquent. Entrepreneurs were particularly pleased with Mr Powell’s cautious stance, which meant that they expected a stronger commitment to policy normalization. Nevertheless, their reluctance to take this narrative forward this week seems to be the fact that after the start of the Covid-19 outbreak, the central bank governor still offered the most cunning assessment of future policy.
Indeed, the markets were upset by the mere mention of considering reversing QE a few months ago. The fact that they saw the start of such a process in a short four months as “terrible” says a lot about Fedi’s communication strategy, which seems to have successfully adapted to the need for investors to withdraw emergency aid. This may encourage officials to expand further if the economy follows suit.
HOW DOES OUR WORK DATA SHAPE FED POLICY CONTRIBUTIONS?
This last part is in focus as the August US Employment Report comes to the fore today. It is expected to slow down recruitment, with an increase in payroll of 750,000 being the lowest profit in four months. However, the unemployment rate is expected to fall lower, while wage inflation will remain at a terrible 4% year-on-year. All in all, this suggests that the weakness of headlines reflects labor shortages rather than weakening demand.
This could raise concerns about the inflationary spiral of wage growth, which is forcing companies to pass on higher labor costs to consumers by raising prices, and workers continue to demand higher wages to cope. Such dynamics could turn what the Fed still claims into a temporary rise in “price rises” into something permanent, pulling the central bank off course in an attempt to bring inflation down to 2% (on average).
If, after the employment report, markets find a significant risk in the likelihood of such a scenario, they may conclude that the QE reduction may be formalized immediately after that month. FOMC meeting. Gold prices are likely to suffer against a background such as US dollar alongside bond yields, which undermines the attractiveness of the non-interest-bearing, year-round anti-fiat yellow metal.
GOLDEN TECHNICAL ANALYSIS – RSI DIVERGENCE WARNS THAT RISE CAN BE BASED ON
Gold prices are idling below the familiar resistance of 1834.14, after marking the lowest level in four months in August, they picked up moodily. The negative difference in RSI warns that the rate of increase is still declining, which may provide a basis for reversal.
Daily closure under support 1787.37 may set the support challenge at 1755.50. If this barrier is also exceeded, the maps can show a decrease in the number of 1700.00 to look again at the 2021 level of 1676.91. Alternatively, the thrust above the thrust sees the next key upside down at the barrier 1870.75.
The gold price chart is created using TradingView
GOLD COMMERCIAL ASSETS
– Written by Ilja Spivak, Chief Strategist of APAC, DailyFX
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