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Daily Brief, Aug 16 – Trading Gold on Consumer Sentiment, Risk-off Stays

Posted Friday, August 16, 2019 by
Arslan Butt • 3 min read

Happy Friday, traders.

It’s been a volatile week and the major reason behind this volatility was mostly the trade war between the US.and China. Starting from this week, the US dollar index traded lower amid an escalation of the trade war between the US and China. In particular, the US government’s decision to label China as a currency manipulator after Beijing allowed the yuan to weaken past the symbolic 7/dollar level has increased questions about how tightly controlled the currency is, and its true value.

Whereas, the safe-haven demand grew on last Friday as US-China trade dispute jitters spurred demand for safe-haven currencies, while the Euro shrugged off a collapse in Italy’s governing alliance and the possibility of new elections.

GOLD prices dipped on Friday but were headed for a third consecutive weekly gain, as fears of a global economic slowdown and a lack of clarity on the US-China trade war boosted the metal’s safe-haven appeal.

Gold is consolidating here within a narrow trading range of 1532 – 1508. The crucial point is that none of the headwinds have gone away; the tariffs got stalled a bit, but the underlying trade war persists and lower yields are supportive for gold.

Watchlist – Economic Events Today

USD – Building Permits – 12:30 GMT

At 12:30 GMT, Census Bureau is due to release the figures for new building permits issued over the previous month. For beginners, the building permit is an excellent measure of future construction activity as getting a permit is among the first steps in constructing a new building.

As per economists’ forecast, building permits are expected to rise slightly by 1.27M vs. 1.23M beforehand. The figure isn’t expected to show dramatical changes in building permits, therefore, we may see no or little movement on this news release.

USD – Prelim UoM Consumer Sentiment – 14:00 GMT

At 14:00 GMT, the University of Michigan’s final consumer sentiment will remain in focus. It’s a survey of about 500 consumers which asks respondents to rate the relative level of current and future economic conditions.

As per economists’ forecast, the data is expected to drop slightly from 98.4 to 97.2, which means the consumers feel less confident about the US economy and it may drag US dollar lower today.

Gold – XAU/USD – Steady Ahead of Consumer Confidence

Gold prices are mostly steady below 1,526 as investors locked in profits after the bullion gained almost 1% during the early Asian session amid safe-haven buying.

Investors are still confused and rushing towards safe haven shelter over concerns that a historic drop in long-term US bond yields could portend a global recession. The US yield curve reversed for a second straight trading session on Thursday as bonds are also considered as safe-haven security.

How US Prelim UoM Consumer Sentiment Can Impact Gold?

Weaker than expected consumer sentiment may prompt investors to look for safe-haven shelter. In that case, we may see more buying behavior in gold, and sell-off in the US dollar today.

On the other hand, stronger consumer sentiment will not be good for gold as investors will be switching their investments into the Dollar instead of keeping it in gold amid strong US economic growth sentiments.

GOLD – XAU/USD- Technical Analysis

On the 4-hour timeframe, the yellow metal gold is testing the double top resistance level of around 1,532 but failed to break above perhaps due to lack of latest fundamentals.

The 50 EMA continues to extend support around 1,500 level. The Doji and bearish engulfing pattern below 1,532 is signaling odds of bearish reversals which is why we are looking for a sell position in gold.

On the lower side, a bearish breakout of 1,508 can lead gold prices towards 1,500 and 1,490. While resistance can be found around 1,526 and 1,532.