December gold settles 1325.9 down $20.30 for the week of August 26th through August 29th, 2016
Gold continued its descent last week losing ground for much of the week amid profit taking ahead of the Federal Reserve Symposium. Rumors swirled earlier in the week as large sell orders were uncovered in early trading Wednesday as rumors Venezuela was selling thousands of contracts at daily resistance levels which supported the liquidation theme.
Lower open interest this week most likely conveyed that long liquidation and not fresh selling ahead of the Yellen commentary in Jackson Hole prompted lower price action on the charts.
While there has been a lot of noise from Fed Governors lately about the increased possibility of a rate hike Janet Yellen said this today : “continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the Federal funds rate has strengthened in recent months.”
However, the Fed chief added, policymakers’ action still hinges on future economic data. “And, as ever, the economic outlook is uncertain, and so monetary policy is not on a preset course,” Yellen said. “Our ability to predict how the Federal funds rate will evolve over time is quite limited because monetary policy will need to respond to whatever disturbances may buffet the economy.”
As a whole the commentary was seen as slightly hawkish. Gold broke to new lows for the session at 1321 but then rallied $25.00 up to 1346 basis December futures, then gave it all back and basically settled unchanged on this extremely volatile day.
To surmise, Yellen simply said what she always says and that is the Fed’s actions will simply rely on economic data. Wild price action ensued today that seemed to hinge on every sentence from the Fed Chair. It speaks more to the hypersensitivity of the markets due to any potential rate increases and for Gold the Fed’s purview of its inflation expectations.
In front of us will be next Friday’s jobs data. Should the nonfarm payroll number come in better than expected, I look for gold to pull back and challenge at least the 100-day moving average at 1300 basis December futures.
Should the jobs data disappoint, I look for gold to challenge 1360 to the upside. A positive jobs number puts the probability of a rate hike as soon as September at the forefront. Non commercial and non-reportable positions for gold came in long over 300K contracts this week while silver came in long over 88K contracts.
Some of these longs were liquidated this week but there is still a sizable long in this market that could come undone following next Friday’s jobs number should it exceed expectations.
Weekly Swing #s GCZ 16 for the week of August 29th through September 2nd
Resistance #2- 1359.7
Resistance #1- 1342.8
Pivot- 1331.9
Support #1- 1315.0
Support #2- 1304.0