Gold

Gold has yet to set a “lower low” since early June, keeping the near-term bullish momentum intact for now.

We’ve seen a vast reduction of net-short exposure to yen futures over the past four weeks. And with the yen rising over 4% since Tuesday's close, it’s likely large specs are already net long.

On Friday, we saw bond yields dip sharply post a disappointing US jobs report. Surprisingly, this did not bolster gold prices as expected. Despite climbing to a weekly high, gold then reversed and dropped.

Risk appetite made a swift comeback when the Fed opened the door to beginning their rate-cut cycle in September. The question is whether Wall Street indices, gold or WTI crude can extend their gains.

Bond traders are stepping back into the market on bets that the Fed will deliver a dovish hold today, which weighed on the US dollar and supported gold, silver and copper ahead of today’s FOMC meeting.

This week promises to be a big one for the markets with lots of data, central bank meetings and company earnings to come. For gold, most of the attention will be on the FOMC rate announcement on Wednesday and the July jobs report on Friday.

The yen has flourished in a risk-off environment with the added benefit of a dovish Fed and renewed bets of a BOJ hike. Commodity FX and metals were also dragged lower in the carnage.

In today's gold forecast, we're witnessing a small rebound not only in gold prices but also across various asset classes, including the major European stock averages while yesterday saw crude oil recovery strongly to close around 1% higher.

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.

Our gold outlook remains positive. The metal’s performance has been bolstered by a weaker dollar and reduced bond yields. Its strong gains in 2024 have reinforced its status as a reliable asset for wealth preservation amidst rising prices.

Gold turned positive on the session after a quiet start, testing short-term resistance around $2420 at the time of writing.

Large speculators flipped to net-long exposure to EUR/USD futures after a 2-week hiatus, whilst AUD/USD breached the bullish threshold for the first time in three years according to the commitment of traders report (COT).

Rate cut expectations from the Federal Reserve are back driving the gold price, making it a relatively easy task of knowing what to focus on in the week ahead. The challenge is knowing how they may evolve given multiple rate cuts are already priced over the remainder of the year.

It seems there is already excitement in the air for a soft CPI report, with EUR/USD rising in today’s Asian session. But if CPI delivers an upside surprise, gold may be the better bet for bears over the near term.

This week’s marquee economic release, the US CPI report, looms large as a potential breakout catalyst for Silver and Gold tomorrow.

Gold and silver have been strongly correlated with copper futures over the past fortnight. The negative correlation with the US dollar index, US two-year Treasury yields and Fed funds futures curve has also strengthened. Combined, it suggests base and precious metals are once again being driven by the US interest rate outlook.