As predicted by analysts, Gold performance last week was as a result of a week U.S. dollar. August gold traded at $1253 an ounce, up 2% from the previous week’s close. At the same time, the greenback was 1% down compared to the previous week.
Silver also ended the week on the green with September futures trading at 16.45,3% up compared to last week.
The sell-off in the dollar was after the U.S senate’s inability to pass legislation aimed at replacing or rather repealing the Affordable health act. The fact that the bill failed has created some doubts on whether fiscal proposals such as deregulation and tax reform will be successfully pushed by Congress.
The greenback is definitely been affected by the legal turmoil in the Trump administration as the Russia connection investigation expands to Trump’s personal business finances.
According to a senior market analyst at iiTrader.com, Bill Baruch, the U.S. dollar weakness is likely to extend to next week and it will take a couple of “better than expected” results for the U.S. dollar to be on the green again. He noted that there is no notable event next week that can positively influence the dollar and that “It is going to take more than just one or two positive reports to stop the slide in the U.S. dollar.”
The effect of Federal Reserve
Considering that most investors are focusing on U.S. political theatrics next week, the Fed Reserve’s monetary policy meeting is bound to have a minor effect.
Although is expected of Federal Reserve to announce that it is prepared to start unwinding its balance sheet of up to $4.5 trillion, a section of analysts believe that it is just a housekeeping move.
The sentiments were echoed by Darin Newsom, a senior analyst at Telvent who was on record saying that, “the only thing left for the Fed to do is announce the launch data of the plan and I don’t think that is a huge deal for the market”.
The Fed announcement, if it comes next week, will have minimal impact on the market.
Is the precious metal running out of momentum?
Although a weak U.S. dollar will be bullish for gold, technical indicators, according to some analysts, point to a weakening momentum in Gold.
In an interview with Kitco News, Karen Jones, a reputable analyst at Commerzbank, noted that even though gold has potential, there are doubts on whether it has enough momentum to surpass $1300 an ounce price level.
Market levels to keep an eye on
Analysts note that there are important levels to watch in the short term.
It is evident that even though gold bulls have the upper hand, prices ought to push above $1300 an ounce to confirm the renewed uptrend.
A failed break out in this case will contribute to the prices plummeting to around $1,200.
The U.S. politics are expected to have a bigger impact on the market compared to the monetary policy meeting by the Federal Reserve. However, economic data will certainly lead to a higher volatility. Expected reports include preliminary manufacturing data, durable goods data, second-quarter gross domestic product, housing sales data and consumer confidence numbers.