Gold

If gold can’t weaken substantially in these conditions, when will it? And what happens when the tide eventually turns, with the US dollar and bond yields turning lower?

Welcome to Technical Tuesday, a weekly report where we highlight some of the most interesting markets that will hopefully appease technical analysts and traders alike. In this edition of Technical Tuesday, we will analyse the EUR/USD, Gold and the Dollar Index.

Gold provided a false break and recovery bac above its 200-day EMA last week, and Monday's trade saw gold find support back above its 200-day MA. The ASX 200 handed back around half of Friday's gains, although there's a reasonable chance it might be able to find support around 7200 given the 200-day EMA resides in the area.

Gold was able to climb in the last two days of last week despite the US dollar and bond yields pushing higher. The precious metal gained ground on Friday as stocks reversed their earlier gains to close lower before falling further today. In other words, the metal has been supported by haven flows in the last few sessions. Gold was attempting to gain further ground today, but unsurprisingly was struggling to do so.

The focus shifts to the Fed next week, with the big question as what the bank sees on the horizon for the rest of the year. US data has remained hot but there are minimal expectations for any actual moves next week.

Gold prices are testing a massive spot of support above the 1900 handle, even as the US Dollar jumps to fresh highs. Can gold bulls turn a support test into a swing?

Gold was lower earlier, but after nearing the key $1900 level it has bounced back to turn positive. The gains are probably driven in part by short-side profit taking and after the ECB signalled it is done with rate hikes, earlier. XAUUSD was still below its 200-day average, which means it is at risk of suffering renewed falls should the US dollar extend its gains further, after rising for 8 consecutive weeks against a basket of foreign currencies.

So, the inflation battle continues for the Fed as we the latest CPI data come in stronger. This should keep the dollar supported against currencies where the central bank is expected to turn dovish. The likes of the euro and pound come to mind. Gold and possibly stocks may also struggle as the renewed surge in inflation may force the Fed to hike interest rates perhaps one more time before the end of the year.

Gold's outlook has turned nasty, at least when priced in US dollars, breaking its uptrend along with the 50-day moving average.

Despite competing with the strength of the dollar, gold has been trading higher against all other major currencies since its low in August. This could suggest that gold is acting as a safe haven, even if it is not immediately obvious from the XAU/USD chart.

With bond yields still very high, the opportunity cost of holding gold, an asset that doesn’t pay any interest or dividends, is the interest you would forgo by not holding government debt. For large institutional investors, investing in government bonds has been a more attractive proposition than gold. In these onditions, it is difficult to be too bullish on gold.

Outside of China's equity markets, ranges were limited on Monday due to the long Labor Day weekend in the US. But with economic data picking up and volumes likely to be replenished, hopefully volatility will follow. We take a look at a couple of potential setups on the gold and EUR/AUD daily charts.

With the US dollar and bond yields soaring until just over a week ago, it’s remarkable the gold price didn’t fall further during August.

Gold looks to US non-farm payroll data. DAX struggles ahead of manufacturing PMIs & US NFP.

Gold facing significant two-way price risk as major inflation reports loom on the horizon.

With hopes that the Fed have reached their terminal rate reignited, we now need to see incoming US data continue to soften to justify the larger moves south for the US dollar and yields on Tuesday. And if data such as GDP and NFP disappoint, it could be beneficial for markets such as EUR/USD, gold and the DAX - all of which we look at today.

A pivotal week for interest rates and the sustainability of the US dollar rally.