XAU/USD: Technical and fundamental outlook

Published date: 22/08/2019
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This week, Gold set a new record around Commodities' ETFs in Wall Street as holdings of gold-backed funds have increased significantly. In addition, worldwide holdings also show a rising demand. Many Exchange-Traded funds are starting to experience the first gold-run since the 2016 bloodbath. In the US only, ETF holdings reached 2 424.9 tons, the highest point since almost a decade. 

There are a few key fundamental events that must be watched this week, as XAU/USD will certainly price in the results. First of all, the  Annual Federal Reserve Policy Symposium in Jackson Hole is expected to move the market significantly on Friday. With investors projecting a  25bp cut in September, any small sign that Powell is changing his mind is going to be shown in the price of gold. If the Chairman gives clues of more dovish measures ahead, the dollar may suffer. 

US economy is still strong. Core Inflation rose slightly, the labour market is not showing signs of weakness and business/consumer confidence is not alarming investors just yet. Nonetheless, elements such as the inverted yield curve and escalated trade tensions can enhance the flow into the gold market. In fact, Goldman Sachs has forecasted XAUUSD to reach $1,600 soon. 

At the time of writing, XAUUSD is trading at almost 1500, a key psychological level. Gold has remained consolidated for almost 9 days now, with price ranging between 1530 and 1493 approximately. If bulls manage to break above the 1540 mark, then the next liquidity zone is at 1571. On the contrary, if the 1492 support does not hold, XAUUSD may retest the 1453 demand zone. 

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