Gold to $1683? Here's Why XAUUSD Will Continue to Melt Down!

Traders' Opinions

Summary:

On the weekly timeframe, Gold is seen breaking through multiple structures--ignoring much of support and resistance levels.

Last week was such an intense week for gold with the market fluctuating more than what it would usually do following heavy fundamental confluences influencing XAUUSD's market price. We also saw US Inflation (CPI) reclaim a 4-decade high figure at 9.1% yearly average--going past 8.6% last May. In line with that, CMF Group's Fedwatch has also flagged out an 80% possibility of a 100bps rate hike.

But with all that said, how would that affect this week’s weekly outlook on Gold? Well.. here's what we see.

Gold to $1683? Here's Why XAUUSD Will Continue to Melt Down! _1

On the weekly timeframe, Gold is seen breaking through multiple structures--ignoring much of support and resistance levels. This is a strong indication that gold is entirely dominated by bears and As depicted in the chart above, we could see that could may be interested in tapping into the support level along the $1680 area.

Gold to $1683? Here's Why XAUUSD Will Continue to Melt Down! _2

In the daily timeframe, it is very likely that price may find a resting point along $1722 level to gather liquidity in proceeding lower--to hit the $1680 support level.

Gold to $1683? Here's Why XAUUSD Will Continue to Melt Down! _3

As we go closer to the 4 hour timeframe, we could see that a resistance was developed along the 38.2% retracement level. However, it is likely that price may pierce through it and find the much needed bearish momentum along the the 50% retracement level which coincides with a higher timeframe key level.

With all that said, we are expecting gold to trade lower this week after a bounce-off the key level along $1725 which also coincide

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Comments

Add to Favorites

Alex

The greenback ended the day lower against majority of its peers on Friday despite upbeat U.S. data after gaining across the board during the week as rally in U.S. stocks triggered profit taking on recent long USD positions.

Reuters reported the U.S. Federal Reserve should target a policy rate in the range of 3.75% to 4% by the end of this year in light of this week's hotter-than-expected inflation data, St. Louis Fed President James Bullard said on Friday, "I would now revise up the policy rate moves," Bullard said at an event organized by the European Economics & Financial Centre in London. Bullard has previously advocated for interest rates in the region of 3.5% by the end of 2022. "The Fed has to react...charting out a course that is somewhat more aggressive over the second half of this year."

Versus the Japanese yen, although dollar rebounded to 139.08 in Asian morning, price retreated sharply to 138.56 in early European morning. The pair then ratcheted lower to session lows at 138.40 in New York morning on USD's broad-based retreat before trading narrowly.

The single currency moved sideways before retreating to 1.0007 in early European morning. The pair then rallied to session highs of 1.0097 in New York morning due partly to USD's broad-based retreat together with cross-buying in euro especially vs sterling, price last traded at 1.0087 near the close..

The British pound dropped from 1.1851 in Asian morning to 1.1805 in early European morning. The pair then traded with a firm bias and gained to 1.1852 in Europe before retreating to 1.1808 at New York open. Cable then rallied in tandem with euro on renewed USD's weakness and climbed to session highs of 1.1874 in New York morning before swinging sideways.

Data to be released this week :

New Zealand business NZ PSI, CPI, Japan Market Holiday, Italy trade balance, Canada housing starts and U.S. NAHB housing market index on Monday.

U.K. Rightmove house price, claimant count, ILO unemployment rate, average weekly earnings, Swiss exports, imports, trade balance, EU construction output, HICP, U.S. building permits, housing starts, redbook and New Zealand GDT price index on Tuesday.

Australia Westpac leading index, U.K. CPI, RPI, PPI input prices, PPI output prices, DCLG house price index, Germany producer prices, EU current account, consumer confidence, U.S. MBA mortgage application, existing home sales, Canada CPI and producer prices on Wednesday.

New Zealand imports, exports, trade balance, Japan exports, imports, trade balance, BOJ interest rate decision, Australia NAB business confidence, U.K. PSNB, PSNCR, France business climate, EU ECB refinancing rate, ECB deposit rate, U.S. initial jobless claims, continuing jobless claims, Philly Fed manufacturing index, Canada new housing price index and U.S. leading index on Thursday.

Australia S n P manufacturing PMI, S n P global services PMI, U.K. Gfk consumer confidence, retail sales, Japan nationwide CPI, Jibun bank manufacturing PMI, Jibun bank services PMI, France S n P manufacturing PMI, S n P global services PMI, Germany S n P manufacturing PMI, S n P global services PMI, EU S n P manufacturing PMI, S n P global services PMI, U.K. S n P manufacturing PMI, S n P global services PMI, Canada retail sales, U.S. S n P manufacturing PMI and S n P global services PMI on Friday.

Source: AceTrader

Risk Warnings and Disclaimers

Comments

Add to Favorites

FastBull Featured

Remarks of Officials

St. Louis Fed President James Bullard on July 15 delivered a speech on monetary policy and recession predictions, with the main points as follows.

The U.S. economy continues to do very well and the labor market is very strong. The country has created about 2.7 million jobs in the first six months of the year, which is an outstanding number. The employment report is expected to remain good in the second half of the year.

Although financial markets have been predicting a U.S. recession next year, Bullard said he is a little skeptical because GDP data may not accurately reflect the economic conditions. The U.S. economy is slowing, but it's slowing to a trend pace of growth from a very rapid pace in 2021. The underlying expectation remains that we can achieve a relatively soft landing.

I see an inverted yield curve as a signal. Previously, an inverted yield curve could signal a recession if inflation was at 2%. But the yield curve is in a different situation this time.

This week's inflation report was "explosive" and inflation has continued to rise unexpectedly. Based on the inflation data, core PCE has not yet peaked, so we need to act quickly to curb inflation as soon as possible. Looking at the "hot" inflation report and given the fact that inflation has been proving to be broader and more persistent, we must set a stronger path for the second half of the year. Instead of trying to achieve a Fed policy rate of 3.5% by the year's end, which has been Bullard's baseline for several months, the Fed may have to try to hit 3.75% to 4% by the end of 2022, after which more adjustments can be made.

I advocate front-loaded rate hikes, but a 75 or 100 basis point hike now probably won't make much difference.

Inflation is staying stubbornly high, but the Fed has the right policy to bring it back to 2% in a relatively short timeframe, something like 18 months. Our commitment to achieving 2% inflation is unconditional.

Bullard's Speech

Risk Warnings and Disclaimers

Comments

Add to Favorites

Owen Li

Inflation in New Zealand has hit a steeper-than-forecast 7.3%, its highest level in three decades, with households facing hefty jumps in food, petrol and housing costs.

Stats NZ has released its quarterly consumers price index for the three months leading up to June. Inflation rose from 6.9% in March to 7.3%, with food up 1.3% and 2.3% rises in transport as well as housing and household utilities.

Major banks, including ANZ and the Reserve Bank had predicted inflation would come in at 7% or 7.1%. Infometrics forecast the 7.3% rate, which is the highest since June 1990.

Housing and household utilities were the top contributors to both quarterly and annual inflation, Stats NZ reported, with the main drivers being an 18% jump in construction costs in the June 2022 quarter compared with same period last year, and rent increases.

"Supply-chain issues, labour costs, and higher demand have continued to push up the cost of building a new house," said Jason Attewell, Stat's NZ general manager.

The next largest contributor was transport, with an annual increase of 32% to petrol prices and a whopping 74% increase to diesel prices.

The rise in transport was partly offset by falling prices for road passenger transport, international air fares, rail passenger transport, secondhand cars, and other private transport services, which includes road user charges, Stats NZ said.

"Half-price bus and train fares came into effect from 1 April and prices for road user charges were reduced from 21 April. These price falls were reflected this quarter," Attewell said.

Those measures could continue to help offset some transport costs, after the government announced on Sunday it would extend half-price fares and reductions in fuel excise duties and road user charges until 2023.

The reductions, initially designed to last three months, were announced in March to help combat cost-of-living pressures as global oil prices soared.

Food prices continue to rise, up 6.5% annually, and up 1.3% from the previous quarter.

Non-tradable inflation, which measures goods and services that do not face foreign competition and is considered a measure of domestic inflation, hit a record high of 6.3%.

The domestic figure was worrying, said Brad Olsen, an economist at Infometrics.

"The fact that you've got that … domestically based inflation figure now running at its fastest since records began in 2000 underscores just how much pressure the economy is in," Olsen said, adding the push to build housing and a lack of rentals means "New Zealand's economy is trying to do too much, with too little resources".

Tradable inflation, which measures goods and services that are influenced by foreign markets, also hit a record high of 8.7%.

Economists expected food, fuel and housing costs to be higher, but what was unexpected was the broad increase in prices across other items.

"[That] culminated in 66% of all items that Stats NZ monitors having increased in price – the largest number of items recorded increasing in price since at least 2018," Olsen said.

The broad consensus among economists is that New Zealand will now be nearing, if not hitting peak inflation, but the decline in prices will be slow.

"Realistically, I think it's going to stay persistently and stubbornly at that higher level for a lot longer than people would want, or expect," Olsen said.

The Reserve Bank is under pressure to cool the economy, including raising the official cash rate further at its next meeting, Olsen said.

"The strength of today's inflation number does give us pause for thought over whether a 75-basis point increase – like the US and Canada have done recently – might be on the cards here in New Zealand."

Source: The Guardain

Risk Warnings and Disclaimers

Comments

Add to Favorites

Samantha Luan

Financial markets remained turbulent through the second quarter of 2022 as inflationary pressures, interest rate hikes, and the ongoing war in Ukraine weighed on investor sentiment, and we've come to accept that the future will likely look different from the past. But we believe this shifting environment could create investment opportunities - for those who can find them. Like a polar bear in a snowstorm, they will likely be hidden, but we believe our active approach will help us identify them.

Higher Inflation, Lower Growth

As we discussed last quarter, the previous two years have been unique in many ways. Most recently, our assessment of a post-pandemic world has changed based on the implications of Russia's invasion of Ukraine, which led to the risk of higher prices and lower growth increasing from our original forecasts.

We now expect U.S. inflation to peak later than we originally expected and to roll over much more gradually than previously expected. Within Europe, we expect the peak to come later than it does in the United States as energy and commodity prices continue to drive inflation. We also continue to monitor wage growth, which is still a key variable but remains negative in real terms and has not added to inflationary pressure at this point.

We expect growth to continue to slow, settling to levels below our earlier projections. European growth is most at risk, and will likely be materially lower, as the impacts of the war limit the European economy's ability to reach its pre-COVID gross domestic product (GDP) trajectories this year. In the United States, we expect growth to end the year up 2% to 3%, but sequential growth will also fall to near zero. While the probability of a recession will increase, we believe a deep or prolonged recession remains unlikely.

Decelerating Earnings Growth

Corporate earnings growth, especially outside the United States, is widely expected to decelerate through much of 2022, yet we have seen very few negative revisions. Given the persistent inflation and macroeconomic uncertainty, we expect that to change with second quarter corporate reports and the related outlook commentary for the balance of the year. While some of that expected deceleration has been reflected in multiple contraction, negative earnings revisions may continue to put further downward pressure on multiples.

Region-Specific Outlook

The rising rate and strong dollar backdrop can be problematic for emerging markets, but every cycle is unique, and our outlook remains region and country specific.

The major Latin America and Middle East countries are actually well positioned for this environment, in our view.

In Asia, India may be more vulnerable given its commodity dependence and generally high market valuation.

The mixed outlook for China is interesting to us. The low vaccination rate among the older population creates a potential for a resurgence in the pandemic, and its effect on growth remains at the forefront. The regulatory overhang and heightened geopolitical risks continue to weigh on sentiment, though the recent regulatory cycle has peaked.

Conversely, we have begun to see some easing of the COVID lockdowns that will likely lead to accelerating demand. In addition, we think the Chinese government's focus on stable economic growth will lead to moderate fiscal stimulus and potential for monetary easing, in stark contrast to many other major countries.

Broadening Our Growth and Valuation Profiles

While our base case is that we avoid a deep recession and inflation ultimately proves manageable, we are broadening the growth and valuation profiles of our strategies to create more balance in this time of economic uncertainty.

Longer term, we believe the outlook for equity investing may be shifting as well, with increased risk that the growth, inflation, and interest rate environment may be more different from what we have experienced in the recent past. Thus, against this backdrop, equities may continue to be under some pressure.

Source: Seeking Alpha

Risk Warnings and Disclaimers

Comments

Add to Favorites

FastBull Featured

Daily News

【Quick Facts】

1. The Italian government is on brink of collapse.

2. Saudi Arabia will not make a clear statement on oil production increase until early August.

【News Details】

The Italian government is on brink of collapse

On July 14, the populist party "Five Star Movement" (M5S), one of the main parties of the ruling coalition, boycotted the parliamentary vote on the Draghi government's bill to tackle the inflation crisis. This brought the "national unity government" led by Italian Prime Minister Mario Draghi for nearly a year and a half to the brink of collapse.

Draghi, an economist by training, thus tendered his resignation to Italian President Sergio Mattarella. However, Mattarella rejected Draghi's resignation, asking the latter to wait until the parliamentary vote of confidence on July 15, and then decide to stay or resign according to the results.

The trigger for the brink of the collapse of Draghi's government, which has a good international reputation, is the dispute within Italy's ruling coalition over a livelihood relief bill.

The bill proposed by the Draghi government would have invested 23 billion euros in government spending to deal with people's livelihood problems - especially the sharp rise in energy prices - caused by the current inflation. Due to the importance of the bill, Draghi has stated before the vote that the vote on the bill will be tantamount to a vote of confidence in his cabinet. If the bill is not passed, he will resign as prime minister.

The second largest party in the Italian Chamber of Deputies M5S, however, refused to vote in favor of the bill on the grounds that it was costly, inefficient, and would build a waste incinerator in Rome and abstained from voting to express its dissatisfaction.

After the vote on July 14, Draghi met President Mattarella at the Italian presidential palace and told Mattarella that he believed that "the confidence agreement on which this government is based has failed." Mattarella rejected Draghi's resignation and asked Draghi to consult with Parliament again to explore the possibility of Draghi's government remaining in power.

For now, the future of Draghi's government remains uncertain.

Saudi Arabia will not make a clear statement on the oil production increase until early August

No obvious progress on oil production increase has been reached at Biden's meeting with Saudi Arabia, and the OPEC meeting on August 3 may be the next important inflection point. U.S. President Joe Biden's much-anticipated trip to the Middle East officially ended on July 16 local time, with no obvious progress on oil production increase reached at the meeting in Saudi Arabia which energy markets are highly concerned. The White House issued a statement on July 15 ET on the results of the bilateral meeting with Saudi Arabia.

According to the statement, Saudi Arabia promised to support the international oil market to reach a balance for sustained global economic growth. The U.S. welcomed the 50 % increase in OPEC production in July and August compared to the original plan, saying that the above measures, together with actions to be taken by the U.S. in the coming weeks, will contribute significantly to the stability of the market.

In addition, the two sides agreed on a corresponding new framework for cooperation on clean energy. They will promote clean energy under the new framework, and Saudi Arabia will make new investments to accelerate the energy transition and address the impact of climate change. The new framework will focus on solar, green hydrogen, nuclear, and other clean energy sources. Efforts to address climate change will be strengthened through cooperation among energy experts from all countries.

In his comments on the trip to Saudi Arabia, Biden said, "We had a good discussion on ensuring global energy security and adequate oil supplies to support global economic growth." "I am doing all I can to increase the supply for the United States of America, which I expect to happen," he added. "The Saudis shared that urgency and based on our discussions today I expect we will see further steps in the coming weeks," Biden said.

Regarding gasoline prices, which had surged to highs last month, Biden commented that prices had really changed and were falling every day as far as he knew. The impact of this trip to the Middle East on oil prices may not be obvious for a few weeks. But as oil spending falls, gasoline prices at the pump will drop.

What lead to Biden's trip to seek oil production increase is the U.S. inflation that has been pushed into all-time highs by energy prices and other factors. Although gasoline prices in the U.S. had fallen to $4.631/gallon from a high of $5.016/gallon in mid-June before Biden's trip, they were still higher than the $3.624/gallon before the Russia-Ukraine conflict.

The cost of Amazon's settlement with the EU on antitrust

Amazon reached a settlement with the European Union over antitrust issues. On July 14, local time, the European Commission announced that Amazon has made an EU-wide commitment not to use non-public data of third-party merchants on its platform to compete with third-party merchants; to fairly rank offers from different sellers of the same goods; and to allow merchants participating in Amazon Gold membership to choose a logistics company other than Amazon Logistics.

Amazon made these concessions under pressure from the European Commission's antitrust investigation. In November 2020, the European Commission initially found that Amazon had a dual identity by both providing a platform for third-party independent sellers and being a seller itself. "Amazon competes directly with these third-party sellers relying on the non-public commercial data of independent sellers on its platform, which benefits Amazon's own retail business."

In November 2020, the European Commission launched another investigation, noting that for the same item, Amazon may display its own offers, as well as those of third-party sellers using Amazon's logistics and delivery services, in preference on the item's Buy Box.

In the commitment letter issued on July 14, Amazon said that Amazon's automated tools and employees cannot use non-public data generated by or relevant to third-party merchants on the platform to compete with those third-party merchants. Amazon defines "non-public data" as one that is not available to sellers. But it is "public" if the seller has access to such data under those EU competition regulations. Relevant data includes sales terms, revenue, shipments, inventory-related information, consumer access data, or seller performance on the platform.

【Today's Focus】

22:00 U.S. NAHB Housing Market Index (Jul)

Risk Warnings and Disclaimers

Comments

Add to Favorites

Damon

Global Market

Despite growing recession concerns, the U.S. equity market managed a strong end to the week last week, with the S&P500 managing a 1.92% gain from the previous day and the NASDAQ rising 1.79%. U.S. equity futures are also looking quite punchy to start the week, so a positive tone should be the order of the day in Asian trading in a week with little local macro content to focus on.

EUR/USD has pulled back a little from parity and sits at 1.0086 now. The ECB holds its rate meeting this week, with at least a 25bp rate hike looking in the bag, though the market may be disappointed not to get 50bp if that is what transpires. We should also hear about the ECB's anti-fragmentation plan this week, but the potential for no resumption of gas flows through Noerdstream 1 (supposed to restart on 21 July) will keep markets on edge.

The AUD now sits at 0.68, up from the lows of last week. Even cable has made some small gains to 1.1878, in a week when we shall likely learn the final two candidates aiming to take over as the UK's new Prime Minister. The JPY has also recovered slightly, falling to 138.40 ahead of this week's BoJ meeting (nothing expected from them).

Asian FX remains a mixed bag. The KRW led the declines on Friday, rising to 1326. And the PHP was back up to 56.395. The THB was also weak on the day and is currently 36.607.

U.S. Treasury yields fell on Friday. The 2Y yield dipped 1.2bp to 3.12%, while the 10Y yield fell 4.4bp to 2.915%, so almost 20bp inverted.

G7-Macro

Besides the ECB decision this Thursday, it is a fairly quiet week, ahead of next week's 2Q22 U.S. GDP and FOMC meetings on the 27th / 28th July.

China

Following the joint efforts of relevant departments and real estate enterprises, a number of residential property construction projects reported in the media earlier as being involved at risk of suspension of work have either returned to normal construction or have resumed construction work. Though the number of projects quoted that have resumed works is below 5, there is a high chance that the Ministry of Housing will partner with the PBoC to establish a fund (mostly likely from banks) to offer loans to construction projects for the resumption of construction so that mortgage payments will return to normal. The main objective of the central government is now to avoid financial systemic risks from residential property companies to the financial system.

What to look out for: RBA minutes and regional central bank meetings

18 July: Singapore NODX; New Zealand CPI inflation

19 July: Australia RBA minutes; U.S. building permits and housing starts

20 July: China prime loan rate; Malaysia trade balance; U.S. existing home sales

21 July: Bank Indonesia policy meeting; Bank of Japan policy meeting; ECB policy meeting; U.S. initial jobless claims

22 July: Japan CPI inflation; Thailand trade balance; Malaysia CPI inflation