Weekly Gold Report

Sean LuskGeneral Commentary

Gold posted its first weekly loss in five as an unrelenting rally in the stock market and a strong bounce higher in the Dollar have longs exiting their positions ahead of next week’s
FOMC meeting and subsequent decision on rates. Gold has for the most part hung in there with this recent rise in equities  but as savvy investors realize both markets trending in the same direction is for the most part temporary. They ultimately go back to trading inverse of each other.  Today the Dow and S&P posted a new all time highs while the tech heavy Nasdaq got crushed. For gold, today’s downward price action which resulted in a $8.80 loss for the week was most likely due to the strength in the Dollar. August gold closed at 1271.4.  The U.S. dollar firmed after the UK national election left no single party with a claim to power and leaves the Brexit and Theresa May’s tenure as Prime Minister in jeopardy going forward. As a result the British Pound gapped open lower and was under duress until the close which prompted a continuation rally in the greenback that started mid week. Of all the data points this week including the Comey testimony, there were no bullish surprises for gold. In fact the last two rallies near the 1300 level for spot gold over the last few months have resulted with a lack of buying conviction to push gold to trade and close above 1300.0 an ounce. Silver exhibited the same type of price action this week as early week rallies were met with heavy selling. Silver lost 30.5 cents this week to close at 1722.0 basis July futures. We have previously noted that a rally in equities would be the biggest impediment for higher prices in gold and silver. Heading into next week’s Federal Reserve monetary policy meeting, CME 30-day fed fund futures are pricing in a 100 percent chance of a rate hike. Clearly its priced into the market. While a known the trade will want clues if the Fed will raise a third and fourth time this calendar year. Should future economic reports reveal weakness similar to last Friday’s disappointing jobs report, future rate hikes would be kicked down the road in my view. This would keep a lid on any rallies in the Dollar while put a bid back in the metals. It’s important to note that gold has rallied following the last two rate hikes with sizable gains. Will this time be the third in a row? Watch the charts and key moving averages. If gold pulls back it must hold the 200 day moving average at 1252.3 and the 100 day at 1248.4. The 50 day sits at 1263.2 basis August futures. Failure here would result in a pullback to the 1220 area in my opinion.

Technicals for next week come in as follows. For August gold, support comes in at 1259.0 and with a close under 1246.8. Resistance is up at 1291.1 and with a close over 1311.0 the next resistance. For July Silver, support is down at 1700.1, and with a close under 1678.3 is next. Resistance is up at 1759.1 and with a close over here, 1796.5 is the second weekly resistance.