Gold Flash Crash Reversed

In a week that kicked off with a flash crash with gold dropping 4.5%, the precious metal is looking to close the week with marginal weekly gains. Although, what is perhaps more important is the break back above 1760, which has been the key pivot for the precious metal over the past year.

Gold Chart: 10-Minute Timeframe

Source: Refinitiv

Topside Levels in Focus

Now that 1760 has been taken out, the focus for gold bulls will be resistance situated at 1790-1800, which previously acted as support in the prior month. That said, while the most recent downtick in the greenback and US yields has stemmed from weak U. of Michigan sentiment data, I expect downside in the US dollar to be limited as the Fed nears the time it will provide a taper signal, possibly as soon as this month at the Jackson Hole Symposium.

The implications for gold, however, are likely to mean that the 1790-1800 area may hold on its first test. What’s more, a cluster of DMA’s from the 1800-1815 area will make the psychological 1800 level a tough area to crack.

The Fed Gearing Up for Taper Signal

Looking ahead to next week, Chair Powell is on the docket, although, given that he will be hosting at a town hall with teachers from across the US, it may be unlikely that he makes a comment regarding any notable shifts to monetary policy, and instead he may wait another week to discuss at the Jackson Hole Symposium.

Elsewhere, the FOMC minutes will be released, and in light of the recent Fed members talking up tapering for this year, the minutes are unlikely to be on the dovish side.

Fed Commentary this Week

• Fed’s Barkin (2021 Voter):

On prices, the Fed has made substantial further progress towards the benchmark. It looks like labor market has more room to run.

• Fed’s Bostic (2021 Voter):

The Fed could start to taper purchases between October and December, but it may be open to moving forward. Substantial further progress goal on inflation has effectively been met, and it could achieve on employment as well if there is another month or two of strong jobs gains.

• Fed’s Rosengren (2022 Voter):

The Fed should announce in September that it will begin reducing its $120 billion in purchases of Treasury and Mortgage Bonds this fall.

• Fed’s Evans (2021 Voter):

Would like to see a few more employment reports ahead of a decision to taper asset purchases.

Gold Price Chart: Daily Timeframe

Source: Refinitiv