The safe haven asset starts the week in a muted fashion following the sell-off seen last week as the US Dollar recovered. Gold prices are now trading in the red for September, correcting against the gains seen over the prior month as the market continues to struggle between the push and pull of risk flows and USD flows. On the one hand, USD weakness over recent weeks has been a key supporting factor for gold prices.
The big downside surprise in the US August jobs report sent the greenback reeling, allowing for gold to extend its recent topside run. However, despite the disappointing release, the Dollar is now turning higher once again as traders set their sights on the September FOMC later this month. The recent USD pullback appears to be viewed as a temporary correction rather than the start of a reversal lower as traders continue to eye Fed tapering over the remainder of the year.
The big focus this week will be on key US data with CPI due on Tuesday and Retail Sales due on Thursday. Both readings have the potential to create plenty of USD volatility and therefore might provide a catalyst for a strong directional move in gold on any big surprises.
Silver prices have started the week under pressure with the market currently extending the losses seen last week. The resurgence in the US Dollar has hit silver a little harder than gold. Looking ahead this week, any upside surprises in US data hold the potential to amplify the sell-off while any weakness in US data would likely see these declines pause for now.
Gold prices have corrected lower from the test of the 1826.71 level resistance. With the MACD turned bearish here and the RSI pointing lower, there are risks of a test of the 1763.88 level and broken bear channel. While that region holds, however, the focus is on a continuation higher in the medium term.
The recent upside break of the bear channel from YTD highs proved to be short lived. Price has since reverses back inside the channel, breaking below the 24.0073 level and the rising trend line from YTD lows. With indicators moving lower there is room for the sell off to continue towards the 22.3205 lows once again.