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Gold Price Forecast: "Still Happy to back the Breakout"

Gold prices

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Gold prices are down a third of a percent at $1805 at the time of writing, putting the precious metal well within a range that has been in place for over a week now. However, analyst and technical forecaster Richard Perry of Hantec Markets continues to back a bullish stance on the outlook.

Since hitting the multi-year high of $1718 last week, there has been a consolidation on gold.

A series of candlesticks all posted within a $29 range above the $1789 breakout.

With the support of the five-week uptrend still underpinning the move higher, gold has posted three positive closes in a row.

The relatively small candlestick bodies does suggest a cautious approach for now, but we are still happy to back the breakout and look to use any near term weakness as a chance to buy for continued upside.

Gold prices July

However, as the market slips back slightly once more today, there is a feel that this is still a consolidation, and one which may breach the trend support (today at $1801).

Even if this rend is breached, if the market continues to build support above $1789, then the outlook remains strong.

It would only really be a move below $1764 (another previous breakout) where the bulls begin to lose their control.

Momentum indicators remain strongly configured, even if they are slightly hampered by the consolidation.

We still look for another breakout above $1818 and a move towards an implied target from the April/June consolidation range breakout of $1820 and perhaps as far as $1868 in the coming weeks.

A move below $1744 support would neutralise the medium term outlook.

 

Market's Vaccine Pump Fades

A slight tempering of the recent surge in risk appetite has taken hold today.

Positive newsflow in recent days over the progress of COVID-19 vaccines (one from US pharma company Moderna, and one out of Oxford University) show that vaccines are in the pipeline.

If this turns out to be the case, this will be the one true way that risk appetite can sustainably recover.

However, economic data out of China overnight, suggests that in the meantime, economic recovery may be wobbly. Whilst GDP for Q2 came in ahead of expectations (at +3.2%, versus expectations of +2.5%), there was concerning data regarding consumers in China.

Retail Sales showed a disappointing -1.8% decline in June, a point at which China was fully out of lockdown.

The consumer may still only account for around half the Chinese economy, and industrial production grew as expected, however, it is the read through to other, more consumer driven economies, which is the concern.

The US is struggling to get its economy out of lockdown as infection rates are at record levels. This does not bode well for consumer confidence and retail sales in the coming months.

June’s Today’s data will show a strong rebound in June, but concerns are for the months in Q3 which will be impacted by the second wave of infections (that’s if the first wave ever really finished).

We have a major central bank today on the docket, but the ECB is likely to be very much in wait and see mode, with the extended easing measures undertaken in June.

Wall Street closed solidly higher last night with the S&P 500 +0.9% at 3226. However, with US futures ticking lower this morning (E-mini S&Ps -0.5%) there is a mildly corrective feel to equities today.

Asian markets have taken the data out of China quite negatively, with the Nikkei -0.8% and more considerably the Shanghai Composite -4.4%.

In Europe there is a risk negative bias, with FTSE futures -0.6% and DAX futures -0.8%. In forex, there is a risk negative and dollar positive skew. This is meaning slips back on AUD and NZD, whilst GBP is also weaker.

In commodities, the dollar rebound is weighing on gold (-0.3%) and silver (-1.0%), whilst oil is slightly lower after a move by OPEC+ to taper its production cuts in the coming months.

The ECB rates decision and US Retail Sales dominate the economic calendar today. The ECB monetary policy decision is at 1245BST and is expected to be a muted affair.

No change is expected to the main refinancing rate of zero or the deposit rate of -0.50%.

There are also no changes expected to the Pandemic Emergency Purchases Program (PEPP) after it was extended in June. The press conference by ECB President Lagarde is at 1330BST and is expected to show the Governing Council very much in wait and see mode.

The US Retail Sales data for June is at 1330BST and is expected to show core ex-autos Retail Sales grew by +5.0% in the month of June (after a rebound of +12.4% in May).

The Philly Fed Business index at 1330BST is expected to slip back slightly to +20.0 in July (from +27.5 in June). Weekly Jobless Claims are at 1330BST and are expected to show claims of another 1.25m last week (after 1.31m in the previous week).