Gold prices are trading sharply lower late in the session on Friday amid profit-taking ahead of the weekend in reaction to a rebound in the U.S. Dollar index. The weakness has wiped out more than half of yesterday’s gains that were spurred by U.S. Federal Reserve Chair Jerome Powell’s reassure that a rate hike was not in the cards for the time being.
At 19:50 GMT, December Comex gold futures are trading $1817.40, down $18.40 or -1.00%.
Although the market is weaker on Friday, it’s still on-track for a weekly gain. In addition to Powell’s initial comment about a rate hike, bullish traders also responded positively to his remark that the U.S. job market still had some ground to cover before the Fed would pull back support.
Most traders agree that gold looks good at current price levels especially after forming a support base over a two-week period. The fact that the Federal Reserve didn’t really say anything that changes its direction on mortgage/bond purchases or rate hikes at least helps to put a floor under the market.
However, since the next Fed meeting doesn’t take place until September 21-22, gold traders are going to be without guidance from policymakers for nearly two-months. This means that they will be at the mercy of volatile economic reports and Fed speaker comments for weeks.
On June 16, the Fed moved up its date for the next Fed rate hike and the gold market collapsed from $1860.40 to $1754.50 in just 10 sessions before recovering to $1839.00 over the next 11 days.
It’s going to be hard to justify $1860.00 gold at this time and without the Fed saying anything meaningful until the third week of September, but the economic reports between now and then could do the talking for them.
Between last Wednesday’s meeting and the September 22 Federal Reserve policy statement, policymakers will have had a chance to see two Non-Farm Payrolls and Consumer Price Inflation (CPI) reports. But gold traders will have had the same chance so I think that over the next seven weeks or so, the U.S. economic data will play a greater role in determining the direction of gold prices.