Synopsis: Discover the latest developments in the gold market as of August 31, 2023, and gain insights into potential entry and exit points for trading XAU/USD (Gold) based on prevailing market conditions.
Introduction: Gold prices remain steady near three-week highs on August 31, 2023, supported by weak U.S. economic indicators, which have raised doubts about the Federal Reserve's ability to continue raising interest rates.
Gold's Resilience Amid Economic Concerns: This week, gold experienced significant gains due to below-par U.S. GDP and employment data, leading to a decline in the U.S. dollar and Treasury yields. Furthermore, gold's safe-haven demand surged as apprehensions grew over a potential slowdown in the Chinese economy, supported by continuous underwhelming economic reports from China.
Impact on Copper and Industrial Metals: The soft Purchasing Managers' Index (PMI) readings from China negatively impacted copper prices, given China's position as the world's largest copper importer. Copper futures experienced a 0.2% drop to $3.8310 per pound, despite enjoying robust gains this week. Weakness in China's manufacturing sector and slowed non-manufacturing growth signal ongoing economic challenges in the country.
Gold Price Movement and Analysis:
Spot gold edged up by 0.2% to reach $1,945.49 per ounce, while December gold futures stabilized at $1,972.25 per ounce (00:28 ET).
Both spot gold and gold futures recorded an increase of about 1.6% over the week.
Potential Entry and Exit Points for Buy and Sell with Stop Loss
Buy Entry Points:
Entry Point: Consider entering a buy position if spot gold breaks above the pivot point resistance at $1942.07.
Stop Loss: Set a stop loss below the pivot point or at the previous support level of $1935.10.
Exit Point: Target the first resistance level at $1949.20 for taking profits.
Entry Point: If the RSI(14) crosses above 70 (overbought territory) and then drops below, wait for the RSI to climb back above 70.
Stop Loss: Set a stop loss below the recent swing low.
Exit Point: Take profits as the RSI approaches overbought levels again.
Sell Entry Points:
Entry Point: Consider a sell position if spot gold breaks below the pivot point support at $1935.10.
Stop Loss: Place a stop loss above the pivot point or at the previous resistance level of $1942.07.
Exit Point: Target the first support level at $1927.98 for potential gains.
Entry Point: If the RSI(14) crosses below 30 (oversold territory) and then rises above, wait for the RSI to drop back below 30.
Stop Loss: Set a stop loss above the recent swing high.
Exit Point: Take profits as the RSI approaches oversold levels again.
Additional Considerations:
Moving Averages: Monitor the moving averages closely. If the 5-day moving average (MA5) crosses above the 10-day moving average (MA10), it could signal a potential buy opportunity.
Stop Loss: Set a stop loss below the shorter moving average.
Exit Point: Target the next resistance level or based on technical indicators reaching overbought conditions.
Copper Price Influence: Given copper's sensitivity to China's economic performance, watch for correlations between copper and gold. If copper's weakness continues, it might impact gold's price negatively, suggesting cautious buy entries.
Risk Management:
Position Sizing: Determine your position size based on your risk tolerance and overall portfolio size.
Diversification: Consider diversifying your trades and not putting all your capital into a single trade.
News Events: Be aware of any upcoming news events or economic releases that could impact the gold market.
U.S. Economic Data's Impact on Gold:
The U.S. dollar slipped nearly 1% during the week, accompanied by a retreat in Treasury yields due to concerns over a less hawkish stance by the Federal Reserve.
Attention is now directed towards the Personal Consumption Expenditures (PCE) data, a crucial inflation indicator for the Fed's monetary policy decisions.
The forthcoming August nonfarm payrolls data is expected to show further cooling in the job market, which could deter the Fed from raising interest rates.
Historically, gold has not consistently responded positively to nonfarm payroll data, despite the figure often exceeding expectations this year.
Factors Shaping Gold's Outlook:
Despite the cooling U.S. economy, the potential for prolonged higher U.S. interest rates and persistent inflation clouds the outlook for gold.
Elevated interest rates amplify the opportunity cost of investing in non-yielding assets, including gold, which has faced challenges in the past year.
Copper's Performance Amid China's Economic Struggles:
Copper prices fell by 0.2% due to weak signals from China's economy, even as copper futures maintained significant weekly gains.
China's manufacturing sector contracted for the fifth consecutive month in August, and non-manufacturing growth also decelerated, underscoring ongoing economic weaknesses.
Expectations are centered on additional stimulus measures from China, including potential adjustments to mortgage and yuan deposit rates to enhance liquidity.
Pivot Points and Technical Indicators:
Pivot Points as of August 31, 2023, 05:30 AM GMT:
Classic: S1 $1935.10, Pivot Point $1942.07, R1 $1949.20
Fibonacci: S1 $1936.69, Pivot Point $1942.07, R1 $1947.45
Camarilla: S1 $1940.95, Pivot Point $1942.07, R1 $1943.53
Technical Indicators as of August 31, 2023, 05:30 AM GMT:
RSI(14): 61.254 (Buy)
STOCH(9,6): 69.290 (Buy)
STOCHRSI(14): 100.000 (Overbought)
MACD(12,26): 1.210 (Buy)
ADX(14): 34.126 (Buy)
Williams %R: -6.006 (Overbought)
CCI(14): 172.3862 (Buy)
ATR(14): 15.8801 (Less Volatility)
Highs/Lows(14): 25.7641 (Buy)
Ultimate Oscillator: 56.853 (Buy)
ROC: 1.664 (Buy)
Bull/Bear Power(13): 44.8520 (Buy)
Moving Averages:
As of August 31, 2023, 05:30 AM GMT:
MA5: Simple - Buy at 1931.74, Exponential - Buy at 1933.32
MA10: Simple - Buy at 1916.88, Exponential - Buy at 1924.99
MA20: Simple - Buy at 1915.08, Exponential - Buy at 1923.53
MA50: Simple - Buy at 1930.67, Exponential - Buy at 1933.89
MA100: Simple - Sell at 1954.83, Exponential - Buy at 1931.31
MA200: Simple - Buy at 1913.80, Exponential - Buy at 1913.75
Conclusion: Gold maintains its foothold near three-week highs as weak U.S. economic indicators impact market sentiment. While recent data points to a potential economic slowdown in China, traders should remain cautious due to the uncertainty surrounding U.S. interest rates and inflation. Technical indicators suggest a strong buy sentiment in the gold market. Copper's performance is influenced by China's economic challenges, and further stimulus measures are awaited.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Trading in the financial markets involves risks and may not be suitable for all investors. Always conduct thorough research and consider seeking advice from financial professionals before making trading decisions.
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