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Currency Trade Is Critical For Gold Market

Commentaries & Views

Last week’s close: Settled at 1232.7, down 2.6 on Friday and down 7.7 on the week

Fundamentals: The currency trade will continue to be a key driver for Gold and this week could make or break it for the metal given that there are three central bank meetings and a deluge of data. We remain unequivocally long-term bullish Gold and believe the market is finding value in the lower half of the 1200’s. Still, we must see a catalyst to bring the buyers to the party. On Friday, the Chinese Yuan made a new low against the Dollar and price action remains there, as we have detailed in recent weeks, this has weighed significantly on Gold. Tonight, Chinese Manufacturing data is due, and the Bank of Japan is expected to tweak policy at their meeting; both of which can encourage a weaker Dollar and be pivotal for supporting Gold prices. Pending Home Sales are due at 9:00 am CT. If you are interested in discussing the factors playing into Gold, feel free to call our trade desk at 312-278-0500.

Technicals: Price action could not achieve the close we wanted to see on Friday and has dwindled lower. The same landscape persists today. The overnight high is 1233 and close above 1235.6 will likely garner additional buying back up to the top part of the recent range below 1250. As we stated above, we must see a fundamental catalyst to get the ball rolling. However, the technicals could truly take it from there as shorts would be squeezed and forced to begin to cover above 1260; the Managed Money net-short position gained 10,000 contracts in the week ending July 24th.

Bias: Bullish/Neutral
Resistance: 1235.6** 1244.6-1249.6**, 1259.2-1260.9**, 1278.2-1285***
Support: 1227*, 1221-1222***, 1204-1210.7***

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