Good morning traders,
Prices for the precious metal, gold, closed at 1,964.42, after placing a high of 1,973.78 and a low of 1,923.03. Overall, the movement of the yellow metal remained bullish throughout the day. On Friday, gold prices rebounded over 2%, on the back of a weak US dollar, due to the US Federal Reserve’s prolonged low-interest-rate strategy.
On Thursday, Fed Chair Jerome Powell said that the US central bank would adopt an average inflation target, which means that interest rates will remain low, even if inflation rises a bit in the future. Gold drew support from the Fed statement that they could allow inflation to run above the 2% target for some time, which suggested that they will keep their monetary policy extremely loose.
Low interest rates tend to support gold, as they are used as a hedge against inflation and currency debasement. This weakened the US dollar, and helped the yellow metal to post gains on the last day of the week.
As far the US stimulus package is concerned, the Republicans and Democrats remained in a deadlock over the details of the package to bolster the US economy, as a result of the ongoing COVID-19 crisis. It is one of the worst periods of unemployment by far in US history, and American families are struggling to meet their needs.
As the Democrats are firm in their demands, there seems to be a little hope for a quick resolution of the issue, and this is weighing on the market sentiment. The latest conversation held between White House speaker Nancy Pelosi and the White House Chief of Staff Mark Meadows on Thursday produced no results. On Friday, Meadows said that Trump was showing a willingness to sign something to the tune of $ 1.3 trillion, indicating some movement toward a compromise with the Democrats. This optimism about the US stimulus package also weighed on the US dollar and added to the gold prices on Friday.
On the vaccine front, the government of the United Kingdom has said that any new and effective COVID-19 vaccine will be given emergency approval for use in the country. They also said that an expanded workforce would be trained to administer the injections quickly, for as much of the population as possible.
The UK government took the initiative to train up an army of health professionals, to administer the coronavirus vaccine, amid fears that there would not be enough people to do so, once a safe and effective vaccine becomes available.
On the data front, at 17:30 GMT, the Core PCE Price Index for July declined to 0.3%, compared to the expected 0.5%, weighing on the US dollar. Personal Spending for July increased to 1.9% from the expected 1.5%, lending support to the US dollar.
At 18:05 GMT, the Chicago PMI for August was released. It was in line with the expectations of 51.0. At 19:00 GMT, the Revised UoM Consumer Sentiment increased to 74.1, in contrast to the projected 72.8, supporting the US dollar. Most of the data was in favor of the US dollar, but traders ignored this, and the market continued to support gold prices on Friday.
Daily Technical Levels
Pivot Point: 1,944.77
Gold prices are trading at the 1,970 level, holding right below an immediate resistance level of 1,976. Closing of candles below this level may drive selling until 23.6%, which provides support at 1,963. Gold may find support at the 1,957 level below this, which is extended by Fibo levels of 38.2%. An upward breakout at the 1,976 level could trigger buying until 2,006. Good luck!