The gold market is off to a quiet start as the new trading week gets underway. As the unofficial last week of summer gets started, markets will be looking forward to the return of training volumes and potential volatility.
The market has seemingly digested last week’s Fed commentary from the symposium held in Wyoming. While some Fed officials gave hawkish commentary, Fed Chairman Jerome Powell’s comments were not viewed as being overly hawkish. Powell did allude to the central bank beginning to taper its asset purchases this year, although he stopped short of saying rates could rise and seemingly suggested that the Fed is in no hurry at all to begin tightening its key interest rate.
The markets will also continue to monitor the evacuation in Kabul as well as weather in the South. Over the weekend, Louisiana and Mississippi were pounded by Hurricane Ida. The storm has left New Orleans without power and the total damage remains unclear. The evacuation of Kabul will continue as the deadline approaches, and any further violence in the region could set the stage for increasing risk aversion and a flight to safety. Markets seem content, however, as the last week of summer gets going before the long Labor Day Weekend. Markets will also look forward to Friday’s release of the latest employment report which could be a major catalyst for or against Fed tapering this year.
As market action unfolds this week, key outside markets may also play a role in price action. The Dollar Index is moving lower in early trade today while crude oil is also moving lower. These two markets could play a major role in gold’s upside in the weeks ahead. Dollar weakness may feed inflationary fears and the desire for assets that may hold value while the currency declines. Stronger crude oil, on the other hand, may also fuel fears of rising inflation and cause potential buyers to consider gold.
The gold bulls remain in control of the market on the daily chart. The bulls have taken the market back above the $1800 level and held it for several days now. The next upside objective is to take price above the July highs in the $1830-$1840 region on a closing basis. The bears, on the other hand, will look to take prices down below key support in the $1775 region.
The gold market certainly has several key factors working in its favor and the market could be gearing up for a major run higher. It will require some cooperation, however, from outside markets and possibly the Fed. A major decline in crypto currencies could also fuel gold buying and potentially give the market reason to head higher on a sustainable trajectory. Whatever the case may be, the bulls will likely buy any dips in the market until proven otherwise. Bullish price action could see the market test resistance in the days or weeks ahead, and if it is taken out on a closing basis, the market could have ample room to run higher.