GOLD SURGES TO ALL TIME HIGH, WILL THE MOMENTUM CONTINUE?

Following the official quota set by the People's Bank of China, coupled with the increase in US unemployment and the weakening dollar, GOLD surged to unprecedented levels, reaching an all-time high this Tuesday.

FUNDAMENTAL  ANALYSIS

Recent data readings reveal a weakening USD, with July NFP reporting 114k jobs compared to a forecast of 176k, and CPI showing 2.9% inflation against a 3% forecast. These disappointing figures diminished the dollar's appeal compared to the reliable safe haven of gold. 

Meanwhile, the minute of July policy meeting was published on Wednesday 21st at 10pm GMT+4. Where “vast majority of participants observed that if the data continue to come in as expected, it would likely be appropriate to ease policy at the next meeting in September”. Later today by 4:30pm GMT +4, US unemployment claim would be released and at 5:45pm Flash Manufacturing and Service PMI’s would be on the wire. While Jackson Hole Symposium would commence later in the evening, where the Fed chairman: Jerome Powell is expected to speak on Friday. He is due to give economic outlook and probably expectation of rate cut by September.

THE PEOPLE’S BANK OF CHINA SET NEW QUOTA FOR COMMERCIAL BANKS

On Tuesday, Gold reached an all-time high of $2531.70 per ounce. Analyst believed this rise is propelled by a surge in safe-haven demand originating from China. The People’s Bank of China (PBoC) issued fresh Gold import quotas to banks, fueling expectations of heightened demand. This trend was further fueled by a significant decline in Chinese 10-year Government Bond yields, reaching unprecedented lows. As at the time of print, the Chinese 10-year yield is at 2.126%. Analysts speculate that Chinese investors are seeking refuge in Gold as a protective measure. Meanwhile, China continues to maintain its position as the largest consumer of Gold globally.

TECHNICAL ANALYSIS

The Dollar index DXY has been overall bearish as a result of several fundamental factors and as the time of print, it’s currently at 101.221. After breaking January 5th low of 101.908, It’s probably headed towards Dec. 2023 low of 100.617 as per technical analyst point of view. The place of retracement to the upper side isn’t ruled out. The weakness of the dollar (DXY) further gives credence to the surge of XAUUSD.

Conversely, Gold rallied and created an all-time high of $2531.70 per ounce On Tuesday 20th of Aug. 2024. There was a retracement before the close of the day at $2513 per ounce. The yellow metal is currently supported at the 38.2% of the Fib. at $2493 with gold price currently at $2501 just a little above the $2500 psychological level. While still retracing, analyst view a further break to the down side would target at 50% and 61.8% levels at $2481 and $2469 respectively before the next surge. Further decline or reversal can’t be ruled out.

Figure 1: XAUUSD, 4H, TradingView