Precious Metals Market

Whilst gold has been under pressure over the past two days, there surely comes a point where dip buyers may want to seek the safety of the precious metal. And I suspect we’re very close to that point.

Later in the week, we will have the release of global PMIs, US GDP and the Fed’s favourite inflation measure – core PCE price index – all of which having the potential to impact the short-term gold forecast.

Gold futures traders waded into the metal ahead of the record high set last week. But if we adjust large speculative positioning for open interest, it turns out they reached a record level of bullish exposure five weeks ago.

Gold's failure to hold above the previous record highs has raised some concern that the metal may have hit a peak. However, I am doubtful that is the case and expect the precious metal to bounce back, potentially reaching a new record soon. So, my gold forecast remains bullish as before despite the metal extending lower at the start of this week.

A combination of factors drew WTI crude oil bulls from the side line on Wednesday, which brings $85 back into focus. Gold didn’t have such luck despite hitting a record high the day prior.

At a high level, the US dollar has not shown a consistent trend of strengthening or weakening in one month before, one week after, one month after, or one quarter after US Presidential Election days over the last 10 elections.

AUD/USD probed a key support level after erasing most of the past six days of gains in just two. And that suggests there could be further downside before bulls step back in. The combination of strong earnings, dovish Fed comments and softer Canadian CPI was enough to push gold and the Dow Jones to record highs, which enjoyed their strongest day's performance in 4 months and 13 months respectively.

This week, it is all about US inflation, which puts the dollar and dollar-denominated assets like gold and silver in sharp focus. Despite their weaker start to the week, gold and silver may have long ways to go on the upside, I reckon. Our gold and silver forecast both remain positive.

Key risk events this week include Jerome Powell’s testimony to the Senate Banking Committee on Tuesday and a CPI report. Should Powell strike a dovish tone and CPI data come in soft, gold, silver and copper could be poised to rally.

Gold's rally paused for breath below resistance ahead of NFP, where volatility is expected. The ASX bumped its head at resistance and looks primed for a retracement lower during what could be a quiet session ahead of NFP.

Today’s data dump includes the ADP private payrolls, unemployment claims, factory orders and ISM services PMI. Friday will see the release of the June payrolls data. Judging by a weaker US dollar (outside of the USD/JPY pair), it looks like investors are expecting this week’s data to be overall on the weaker side. In any case, our bullish gold and silver forecast remain unchanged.

Today’s flattish performance of gold mirrors that of last month when gold traded mixed but managed to end as flat as a pancake by the close of play on Friday. The Dollar Index posted a slight monthly gain, indicating that gold investors largely ignored the dollar's strength. Throughout June, gold traded within a narrow range, peaking just above $2387 and bottoming just below $2287.

Gold and silver have been on the rise in the last couple of days, recovering from weakness earlier in the week. Once again, gold has risen alongside equity markets, suggesting the recovery is not entirely driven by haven flows amid uncertainty surrounding the upcoming French snap elections, which appears to have only impacted the local stock and bond, as well as regional, markets.

For silver, a significant breakout earlier this year could lead to a surge to $35. However, in the short term, we need to see a bullish reversal before aiming for these longer-term targets. Thus, my gold and silver forecast remains bullish despite recent challenges.

A confirmed break below $2275 support in gold would project a “measured move” objective for the pattern down around $2100.

Election uncertainty in France and upcoming key US data are some of the risk factors keeping a lid on gold (XAUUSD) and silver (XAGUSD) prices. Still, both of our gold and silver forecast remains bullish. Their ongoing consolidation phase should not be mistaken for a sign of weakness.