USD, Bond Yields, and US debts
So far, we know that FED, starting its Hawkish policies, and as much as we have good economic data and the labor market recovers, we can slower down the pace of Bond purchasing. According to this impression of the statement, last Thursday employment numbers were not good, however, it was not that much to increase the fears and concerns. And Monday we had very important data on Durable Goods Orders which missed the expectation to raise 0.5% and increased only 0.2% in August, but Core Durable Goods Orders, increased 1.8%, more than twice above the 0.7% expectations. What data telling us is that the economy is recovering, even if it does not move that fast.
In the week ahead, we have some factors that checking them, can tell us the next direction of Gold. One of them is US Bond Yields. Usually, when bond yields are increasing, it means we have a lower risk in the market and less demand for Bonds, the same for the Gold safe-haven demand. Yesterday we had US 10-year Bond yields above 1.50% at the same time, this higher yield, due to the situation we are in, lifted the US Dollar, and it was the reason to stop Gold bulls in the chart and send it back to where it started around 1,750.
This week we do also have many speeches from FOMC members and most important, FED Chair will testify before Congress. This testimony should give us more insight from FED policies and members' outlook on the Economy and inflation path. What we are expecting is the FED chair to warn Congress that inflation pressures could last longer than expected.
Another concern of the week is the US debt limit. This month US Treasury will run out of money, and if Congress does not increase it, the government will be shut down. This uncertainty also will increase the market risk, while solving this problem by September 30 will calm the tensions, which is not in favor of gold bulls. The US government debt continues to swell, and it is a bit less than $30 trillion.
The sum of these conditions is a bit confusing. However, the overall outlook of the economy is fine and on its way to recovery. This market sentiment and atmosphere is not in favor of Gold price, and in the mid-term can limit the shot uptrends and increase the chance of seeing that in lower prices.
From the technical side also it is in a clear downtrend in the Daily chart as we see in the below chart. Price moves under MA lines. EMA crossing strategy also supporting the downtrend, while RSI at 40 and decreasing OBV trend line also confirming it. Breaking under 1738 is the key to see the price after in 1,600 area. On the flip side, a recovery above 1,760 again increasing the chance of correction here, however, it does not mean a bullish trend for a long time, unless if the price can breathe above 1,836.
