As we wind down into another weekend it’s time to take stock of the week’s winners and losers. Friday’s can be a time of celebration or commiseration depending on your performance. However, one area that always interests me particularly, if talking with traders about the trades they missed. It seems to be that the idea of a missed opportunity provokes an even greater response than a win or a loss. So, this week it seems that the move most people are talking about is the upward move in gold. After stagnating recently, gold prices jumped over 2% this week. So, let’s take a look at what caused this move and why it was a great trade.
What Caused the Move?
Fed Holds Firm At FOMC
The main catalyst behind the pop higher in gold this week, was the sell of fin the US Dollar. You have to feel slightly sorry for Dollar bulls at the moment because it really feels like one step forward and two steps back. Ahead of the July FOMC, the market was firmly expecting a hawkish signal from the Fed. On the back of a slew of positive data and with vaccination rates and reopening both showing solid progress, USD upside positioning has been gradually building again.
However, in an admirable show of consistency, the Fed once again stuck to its guns reaffirming its view that any spike in inflation will prove transitory and as such, won’t require a shift in policy. While the Fed acknowledged that there had been progress in the economy it reiterated its message that there is still a great deal of further progress needed before tapering will be necessary.
US GDP Misses Mark
Following the FOMC meeting, which saw USD down and gold higher, the market received an almost immediate confirmation of Powell’s message. Advance quarterly GDP came in well below expectations at just 6.5%, almost 2% lower than forecast. This proved enough to put an end to any near-term USD bullishness. With the market now no longer expecting any tightening over the summer, there is plenty of room for USD to unwind further, sending gold higher. So, if you caught the move, well done! And if not, there’s always next week. Let’s take a look at the technical picture.
The rally in gold this week has seen the market trading back up to test the 1826.71 level and bear channel top. With RSI and MACD both bullish here, the focus is on a break higher with a continuation above this level putting the focus on 1871.04 and 1919.92 next. To the downside, 1763.88 remains the key support to note.