Market alert: Gold prices approach key levels ahead of Fed speak

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There wasn’t much on offer in terms of US economic data, mortgage applications according to MBA dropped 0.8% for the week ending September 2, and the trade deficit for July narrowed to -$70.7bn (though without services worsened to -$91.1bn).

The US Federal Reserve’s (Fed) Beige Book pointed to "some degree of moderation" in the rate of increase for pricing according to business reporting, and "improvement in labour availability" though "labour market conditions remained tight". In central bank speak, we had the Fed’s Mester not convinced inflation has peaked due to rents, and Vice Chair Brainard wanting "several months of low monthly inflation readings to be confident that inflation is moving back down to 2%".

Real yields were in for a slight drop in the bond market, and market pricing for a 75bp (basis point) increase later this month out of the Fed has risen further. We've got Chairman Powell speaking tonight and consumer credit for July, and more Fed speak on offer tomorrow.

Gold Technical analysis, overview, strategies, and levels

Yesterday's lows failed to offer past its previous 1st Support level that managed to hold, conformist sell-breakouts failing while contrarian buy-fades outperformed, with the breach of its previous 1st Resistance level limited on follow-through but offering some for contrarian buy-breakouts with prices as of writing near the level.

And while it has shifted a couple of technical boxes that are easiest to shift (and more so for this daily time frame), more will be needed to change its technical overview, prices are now at the upper end of its bear trend channel (depending on candlestick classification).

IG client* and CoT** sentiment for Gold

Retail trader bias is still in extreme buy territory, even after dropping a notch to 83%, with more upside gains in price required for plenty of longs to be able to unwind in profit. CoT speculator bias is as of last week though painted an ongoing heavy buy bias at 67%.

When it comes to the other precious metals, retail traders are also extreme buy in silver at 90%, and so too in platinum at 88%.

Gold chart with retail and institutional sentiment

*The percentage of IG client accounts with positions in this market that are currently long or short. Calculated to the nearest 1%, as of today morning 8am for the outer circle. Inner circle is from the previous trading day.
**CoT sentiment taken from the CFTC’s Commitment of Traders report, outer circle is latest report released on Friday with the positions as of last Tuesday, inner circle from the report prior.