Gold finished the week with its biggest weekly gain in two months on Friday. August gold futures settled 1254.9, up $27.10 for the week. September silver settled 1645.5 up .52 cents for the week. The rally this week comes on two fronts. First, a surging euro pushed the dollar to its weakest since June 2016, making bullion cheaper for holders of other currencies.
Bond yields also fell after Mario Draghi said on Thursday the European Central Bank was in no rush to scale back its asset purchase program. Second, market participants have also noted that the U.S. dollar is also suffering because of ongoing turmoil in Donald Trump’s administration as an investigation into potential ties between Trump and Russia expands into the president’s personal business finances.
In my view going forward, a majority of traders and investors will still be focusing on the political drama in Washington next week and beyond which is nothing new. The major event however will be the Federal Reserve’s monetary policy meeting that is expected to be a relatively minor event due the fact there is zero expectation in the market for a change in rates.
As revealed in the May’s monetary policy meeting minutes, the central bank would look to reduce investments in treasuries by $6 billion a month, increasing that level by $6 billion every three months until it reaches $30 billion. At the same time, it would reduce its holdings in mortgage-backed securities by $4 billion a month, raising the limit by $4 billion every three months until the amount reaches $20 billion.
While the Federal Reserve is not expected to have much impact on markets, it will still be the main economic event next week. However, a full docket of economic data will help to create some volatility in markets. Key reports include housing sales data, preliminary manufacturing data, consumer confidence numbers and durable goods data. The week ends with the second reading of second-quarter gross domestic product.
Technically gold climbed and settled above its major moving averages with this weeks rally and now sits above the 50, 100, and 200 day moving averages. In my view the market should channel up to 1260. Should the rally extend, look for the rally to trade to first weekly resistance is at 1264.5 and with a close above 1274.2 the next level to the upside. Support for next week sits down at 1236.3, and with a close below 1217.8 is next. For September silver, support comes in first at 16.29 and then down at 16.09. A close below here and 15.73 is next. Resistance is up at 16.65 and above there at 16.85.