Weak Chinese Data Drives Gold Lower
A rally in the Dollar Index as well as weaker crude oil prices were not the only factors sinking gold in today’s action. Weaker-than-expected data out of China overnight also sunk the metals and may keep the bulls second-guessing their intentions. The world’s second-largest economy saw its exports decline by 14.5% in July, year-over-year, and that represents the steepest decline since the Covid period of February 2020. Imports were also lower-than-expected, declining by 12.4%. The lack of encouraging news from China may keep its central bank busy. More stimulus measures could be seen in China shortly.
Key inflation data is also set for release this week in both the U.S. and China. The Consumer Price Index and Producer Price Index are both set for release on Thursday and Friday of this week. The data sets are expected to show a slight uptick from the previous readings and could be market-moving if the uptick is enough. A miss in these data points could have a bullish impact on gold and stocks, as worries over price pressures may recede further if the data suggests it. Inflation has been a focal point for financial markets for some time now, and the Federal Reserve has hiked interest rates aggressively to combat it.
Inflation is likely to remain an area of focus regardless of what this week’s data may suggest. The Fed has, for now, appeared to reach a point at which it is comfortable maintaining rates rather than continuing to raise them. The Fed could elect to keep hiking, however, if the data suggests it is necessary. Gold, equities, and other markets may find themselves in a holding pattern until more is known about the central bank’s plans going forward. The end of summer is also approaching, and more investors may be taking last-minute getaways before the kids go back to school. This could lead to less-than-stellar price action in the weeks ahead.
The bears are in control of the daily chart currently. They will look to take out the June lows around $1,939 before gaining further momentum. The bulls still need to produce a close above the key $2,000 level. The market has exceeded this level on prior occasions but has yet to put together a sustainable move higher. A solid close above the $2,000 level could set the stage for the bulls to take the market higher. If able to sustain such a move, the bulls could even target previous all-time highs in a short period of time. They currently appear to be lacking a sufficient catalyst to take the metal higher, however and may need to wait until the summer is over before significant trading volumes return. That could make the next several weeks a bit more interesting as either the bulls or the bears lay a possible foundation for what may be to come once the fall gets underway.