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GOLD : Need Bullish Breakout

(Sat, 30 May 2020). WEEKLY FUNDAMENTAL GOLD PRICE FORECAST: NEUTRAL.

Gold prices have seen their bullish breakout attempt fail to gain traction, although it’s still too soon to say that further gains are out of the question. The start of a new month brings about a wave of ‘high’ rated event risk on the DailyFX Economic Calendar, but much of the bad news will already be priced in to financial markets.

 

GOLD PRICES WEEK IN REVIEW

Gold prices finished lower versus every single major currency, although losses were shallow enough that traders may not be convinced that the uptrend is finished just yet. After all, it was the week just before this past one that gold prices hit fresh yearly highs, and in some cases, all-time highs; the lone exception was gold in AUD-terms (XAU/AUD).

The top performing gold crosses this week were gold in JPY-terms (XAU/JPY), which only lost -0.11%, and gold in USD-terms (XAU/USD), which only lost -0.28%. Unsurprisingly, with the British Pound and Euro both turning broadly high versus the Japanese Yen and US Dollar, gold prices in both GBP-terms (XAU/GBP) and EUR-terms (XAU/EUR) proved weaker, falling back by -1.78% and -2.11%, respectively. Gold in CHF-terms (XAU/CHF) wasn’t as weak (-1.29%) though still dragged down by the performance of the European currencies, otherwise offset by traders shedding the low yielding, safe havens.

The commodity currencies continue to trade higher, tracking global equity markets as risk appetite broadly rebounds, decreasing the desire by market participants to hold safe haven assets like gold. The continued run higher by the Australian and New Zealand Dollars in particular left gold in AUD-terms (-2.26%) and gold in NZD-terms (-2%) downtrodden over the past week.

 

TOP FX EVENTS IN WEEK AHEAD

The start of a new month brings about a wave of ‘high’ rated event risk on the DailyFX Economic Calendar, but much of the bad news will already be priced in to financial markets.

  • On Monday, gold in USD-terms (XAU/USD) will be in focus as slight rebounds are anticipated to be seen in the dueling US Markit Manufacturing and ISM Manufacturing PMIs.
  • On Tuesday and Wednesday, gold in AUD-terms (XAU/AUD) will be of primary interest given the June RBA rate decision and the Q1’20 Australia GDP figure.
  • Also on Wednesday, gold in CAD-terms (XAU/CAD) will likely see greater action with the June BOC rate decision on tap.
  • On Thursday, all eyes will be on gold in EUR-terms (XAU/EUR) as the June ECB rate decision arrives.
  • On Friday, attention turns back to gold in CAD-terms (XAU/CAD) and gold in USD-terms (XAU/USD) with the releases of the June
  • Canada jobs report and the June US nonfarm payrolls report.

 

GOLD PRICES STRUGGLE AFTER EXITING TRIANGLE CONSOLIDATION

The main point of reference for gold prices is gold in USD-terms (XAU/USD), which is where our attention will exclusively lie for the rest of this note. It’s worth considering the struggle that gold prices have faced over the past week, experiencing a rush to fresh yearly highs in all but one pair (XAU/AUD), only to see gains slip away and prices reverse lower – across all pairs – in the final week of May.

The backdrop of risk appetite improving – equity markets rallying, safe haven currencies being sold in favor of riskier currencies typically more sensitive to economic growth – has brought into question the viability of the recent effort by gold prices to reach new highs. In other words, it’s very possible that the gold market may have reached a point of exhaustion.

 


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