Weekly Market Analysis / 26 - 30 July 2021

Despite closing the week below at $1815, gold price recorded weekly gains, courtesy of the dovish Fed decision and escalating coronavirus concerns globally. For many market participants, last week turned on the FOMC meeting and announcements mid-week. This was particularly true for those in gold markets: The immediate reaction to “Fed Day” pushed spot prices for the yellow metal away from support at the $1800/oz that was threatening to break earlier in the week.

As expected, the Fed left the most impactful tools of monetary policy unchanged again this month. It was potentially meaningful shifts in the FOMC’s post-meeting statement and in Chair Jerome Powell’s press conference that affected market action for gold, US Treasuries, and the US Dollar.
Looking back at the market reaction to the Fed, gold prices immediately moved higher on the FOMC news, rising to $1810/oz through Powell’s press conference in the afternoon. Following a brief pause, the start of overseas trading on Wednesday evening saw Asian markets get their first opportunities to trade the news.

What happened last week? 

  1. Wednesday, July 28 - FOMC Interest Rate Decision - Monetary policy unchanged
  2. Thursday, July 29 - US Initial Jobless Claims - Initial jobless claims declined by 24,000 to 400,000 in the week ended July 24.
  3. Thursday, July 29 - US GDP Growth (Q2) (1st Est.) - The preliminary estimate showed that the U.S. second-quarter GDP rose 6.5% versus markets’ expectations of an advance of 8.5%.
  4. Friday, July 30 - PCE Price Index (June) - The PCE price index for June increased 4.0 percent from one year ago, reflecting increases in both goods and services.

Key takeaways

  1. Gold will average $1,835 an ounce in the third quarter of the year and $1,841 in the fourth quarter. For the full year, prices will average $1,812, the poll found, while in 2022 they will average $1,785
  2. For silver, the poll forecast an average price of $26.50 an ounce this year - a little above its current level of $25.50 – and $25 in 2022

Short-Term Outlook

We’re going to be watching the price action and reading the order flow at $1820 over the short-term to determine if the buying is starting to become stronger than the selling at this level. If $1820 break possible extend to $1832 and next target $1849.

If $1808 fails as support then look for the selling to possibly extend into $1793.80. If this fails then look for a possible acceleration to the downside with the next target bottom at $1778.50.