Can bulls stay there?
The main question for Gold traders is that can Bulls stay up there? Last week all focuses were on Powell's speech and this week's eyes will turn to the Employment report, where Powell believes still need help, and in his speech insisted on that, emphasized that support from the labor market will be continued. About reducing the supports, he told: "Today, with substantial slack remaining in the labor market and the pandemic continuing, such a mistake could be particularly harmful,"
COVID-19 crisis is there for more than a year and still, we have the labor market challenges as the main challenge of FED. More than 21 Million jobs have gone and in recovery, now we have still 7 million unemployed to reach the same level as pre-pandemic.
The summary of Powell's speech means that we can still count on FED support. So, stock markets can go forward and print new highs after these comments.
And what Gold's reaction can be?
After Mr. Powell's comment, the yellow metal touched the 3-week high on Friday. Mr. Powell could not put the light on what exactly can happen for tapering in 2021, but what we can expect and price on that more than before, is that from the beginning of 2022 we will have the tapering.
For the week ahead, we have to follow the employment data on Wednesday, Thursday, and Finally on Friday, when the Non-farm Payroll numbers will be published. The market now is more cautious, however in the mid-term, when as long as we do not have a clear idea of what will happen, Gold will be supported. On the other hand, Dovish policy, which is the market perception of Powell's comments, means less demand for the Dollar, and weaker USD will lift the Gold, while same reason can decrease the Gold's demand also. So, putting all these together means that Gold's bulls and Bears, all are limited!
As we can see in the below chart, side movement between 1,782 and 1,840 is the market expectation for September. For the week ahead, the lower band of this side movement can be at 1,800.