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Elevated Treasury Yields Signaling More Gold Weakness?

- Gold prices experienced their sharpest weekly decline in over three years, dropping 4.52% ($121.23) to close at $2,563.22. The sell-off was driven by rising Treasury yields, a stronger U.S. dollar, and shifting Federal Reserve policy expectations.

- The 10-year U.S. Treasury yield climbed to 4.505%, increasing the opportunity cost of holding gold. Meanwhile, the Dollar Index (DXY) surged to a one-year high of 107.064, reducing gold’s appeal to international buyers. Strong economic data, including better-than-expected retail sales and persistent inflation pressures, further supported the dollar and reduced expectations for near-term Fed rate cuts.

- Technical View, gold remains under pressure, with critical support at $2,533.76. A break below this level could lead to further declines toward the 50% retracement level at $2,387.23. Resistance levels are noted at $2,571.68 and $2,631.04. The short-term outlook is bearish, with sustained dollar strength and elevated yields likely to weigh on prices. However, stabilisation at current levels might spark a technical rebound above $2,571.68 to 2600.

“Every trade you make out of boredom is a wasted bullet—a piece of your limited capital, energy, or risk tolerance spent without purpose. In this industry, every bullet matters, and you can’t afford to waste them on unfocused trades. Each move should be intentional, aimed at real opportunity (A++), because every bullet you use now impacts your ability to capitalise on the next one.”

Relationship between volume (Effort) and price movement (Result) to understand market behaviour

Effort: This is the trading volume, which shows the level of buying or selling activity.
Result: This is the price movement that happens because of that trading activity.

Interpretations

1. Effort Equal to Result:
High volume leading to a significant price move suggests the market is moving naturally in the trend's direction.

2. Effort Greater Than Result:
High volume with little price movement may indicate a potential reversal, as buying or selling pressure is being absorbed.

3. Effort Less Than Result:
Large price movement on low volume might suggest the move is weak and could reverse.

•Absorption:
- During trends, high volume with little price movement can indicate that big players are preparing for a move in the opposite direction.

•Climactic Action:
- A sharp price move on very high volume can signal the end of a trend.

•Testing:
- After a strong move, a small price change on low volume might confirm the trend's strength.

Gold Market—Fed Rate Cut Hopes and Middle East Tensions


- Last week, gold prices edged higher, closing at $2,660, up just 0.13%. The ongoing conflict, particularly Israeli airstrikes on Hezbollah, boosted safe-haven demand for gold, though the strength of the U.S. dollar limited significant gains.

- Early in the week, strong nonfarm payroll data sparked concerns that the Fed might hold off on cutting interest rates, causing a dip in gold prices. However, inflation data released later in the week, which showed the slowest annual rise in over three years, shifted sentiment back towards expectations of a Fed rate cut in November. This helped gold recover as lower interest rates generally support non-yielding assets like gold.

- Despite the dollar remaining strong and U.S. Treasury yields staying elevated, inflation data softening by week’s end offered some relief for gold. By Friday, a stronger case for monetary easing, bolstered by the Producer Price Index (PPI) report, pushed gold prices higher.

- Looking ahead, gold is expected to trade within a narrow range, with key support around $2,604.39 and resistance near $2,685.64. Geopolitical tensions, especially in the Middle East, will continue to support safe-haven demand, but much will depend on upcoming U.S. economic data and any further escalation in the conflict. If the Federal Reserve confirms a rate cut at its November meeting, it could push gold prices higher, as lower interest rates typically benefit non-yielding assets like gold. However, the strength of the U.S. dollar and persistent inflation concerns may limit significant upward movement.

Institutional Traders — Retailer Traders

- Institutional traders don’t have direct access to see where retail traders place their orders. Only your broker knows the exact details of your orders. However, some brokers, particularly those using a Market Maker model, could potentially trade against you by taking advantage of your stop-loss orders. But generally, institutional traders don’t need to see individual orders to exploit them—they can anticipate where retail traders are likely to place stops based on experience.

- For example, many retail traders tend to place stop-losses just below support levels or above resistance levels. Large institutional traders are aware of this and, with their substantial capital, can move the market to those key areas, triggering a rush of stop-loss orders. Once those stops are triggered, the price often bounces back, allowing the institutional players to push the market in the direction they want. This creates a temporary price movement that can appear like a reversal, only for the market to resume its original trend later.

It’s like an elephant jumping into a small pool—there’s a big splash, and smaller traders get caught in the wave. But once the big player is done, the market often calms down again.

- To avoid getting caught in market swings, don’t rush to be the first buyer or seller. Instead, wait for strong confirmation that the move is real before entering the market. This way, you’re less likely to be caught in the temporary shakeouts caused by larger players.

Follow long-term trends often driven by institutional players.

Market Overview — Middle East Tensions
#gold #oil

- Gold prices have eased slightly, trading just below the record high of $2,685.64, with the stronger U.S. Dollar being a primary factor restraining further gains. Typically, a stronger dollar makes gold, which is priced in dollars, more expensive for foreign buyers, reducing demand. Despite this, geopolitical tensions, particularly the ongoing conflict in the Middle East, have driven investors to seek the safety of gold, but its rally is capped by the dollar’s strength.

- Concerns are growing over potential disruptions to global oil supplies due to the conflict, with speculation that crude oil could rise to $100 per barrel. - Such a surge could increase inflationary pressures at a time when the Federal Reserve has been making efforts to control inflation. These pressures could reignite interest in safe-haven assets like gold. However, the relationship between gold and the dollar remains crucial; both are safe-haven assets, and the stronger dollar is keeping a lid on gold’s gains.

Technical View
- From a technical perspective, traders are watching key support levels closely. Gold’s minor pivot point is at $2,616.25, which is a critical level for bullish traders. If gold prices drop below this, they may decline further, with potential support zones around $2,546.86 and $2,531.77. These levels are being monitored closely, especially with the added uncertainty of geopolitical tensions and fluctuating market conditions.

- Looking ahead, U.S. jobs data, including the ADP employment report and Friday’s nonfarm payrolls report, will be important for gauging the Federal Reserve’s next move. Any signs of economic weakness could increase the likelihood of further rate cuts, potentially providing support for gold. Currently, markets see about a 38% chance of a 50-basis-point rate cut from the Fed in November, which could be favorable for gold prices.

Gold Market Update

- The precious metals market has witnessed an extraordinary surge in gold prices, with the yellow metal achieving one of its most impressive runs in recent history. Gold has soared by over 21% this year, reaffirming its status as both a safe-haven asset and a potential source of significant returns. The rally intensified following the Federal Reserve's first interest rate cut since 2020, with gold gaining nearly 3% in the week after the announcement.


- The recent price surge can be attributed to several factors. Market participants are reacting to the Fed's single rate cut and the perception that this move signals a pivotal shift in monetary policy. Investors anticipate a series of rate cuts that could bring the federal funds rate down to approximately 3% by mid-2025. Additionally, rising geopolitical tensions in the Middle East and the ongoing conflict between Russia and Ukraine have contributed to gold's appeal as a safe-haven asset.

- While these factors continue to support gold prices in the long term, some market observers suggest that a period of consolidation or even a moderate price correction may be on the horizon. The timing and extent of such a consolidation remain uncertain.
- The market is closely monitoring the Federal Reserve's next moves. According to the CME's FedWatch tool, there is a 59.2% probability of another 50-basis point rate cut at the November FOMC meeting, up from 37% just a week ago.

- Investors and Fed officials alike eagerly await the release of key inflation data on Friday.

- If the PCE report aligns with expectations, it would underscore the significant deceleration of inflation from its 40-year high in June 2022. This could bolster confidence among Federal Reserve officials that retail prices are stabilising and moving towards their 2% target, potentially paving the way for further rate cuts.
- The Fed's shift in focus from battling inflation to addressing the cooling labor market reflects a delicate balancing act. By reducing borrowing costs, the central bank aims to stimulate economic growth and prevent further job losses, while maintaining price stability. As the gold market digests these developments, investors remain vigilant, watching for signs of consolidation or continued upward momentum in this historic bull run.

50-Basis Point Rate Cut, Causing Volatility in Gold and Stock Markets

- In a significant shift in monetary policy, the Federal Reserve announced a more aggressive 50-basis point rate cut following its recent Federal Open Market Committee (FOMC) meeting. This marks the first interest rate reduction since 2020 and signals a pivotal change in the central bank's monetary policy.

- The steeper-than-expected cut, one of two considered options (50 or 25-basis points), caused significant volatility in gold prices.

- This policy shift underscores the Fed's dual mandate of maintaining full employment while keeping inflation reasonable. Chairman Powell expressed confidence that previous rate hikes had effectively lowered inflation and would continue approaching the desired target.
- The new Fed funds rate now stands between 4.75% and 5%, with the Fed signaling its intention to normalise interest rates to around 3% over the coming year. The market reaction to the rate cut was volatile across various asset classes. Major stock indices closed with modest losses after initial gains.

- Gold's price movement following the announcement was particularly intriguing. Despite expectations that a larger rate cut would boost gold prices, the metal turned negative after briefly hitting a new record high. This unexpected reaction has puzzled many analysts, as lower interest rates typically make non-yielding assets like gold more attractive.

- As markets assess the implications of the Fed's decision, gold remains in a pullback, trading near $2,600, while indices hover at all-time highs.

Anticipation of Federal Reserve Rate Cut

- Anticipation of a Federal Reserve rate cut this week has significantly boosted gold prices. According to the CME FedWatch tool, traders now see a nearly 50% chance of a 50-basis point (bp) reduction, up from just 28% days ago. Former New York Fed President Bill Dudley contributed to this momentum by advocating for a larger cut to stimulate economic growth.

- There is a growing consensus that the Fed could announce a 50-bp cut, with market participants now assigning a 67% probability for this larger-than-expected reduction, compared to only 34% last week. Over the weekend, media reports further fueled the prospect of this aggressive easing.

- If Fed deliver the anticipated 50-bp cut, gold prices could surge past $2,600 per ounce, with projections ranging between $2,649.43 and $2,660.90.

- However, if the Fed opts for a more modest 25-bp cut, some market analysts warn of potential disappointment among bullish traders, which could lead to profit-taking. In this scenario, gold prices may retreat towards the previous high of $2,531.77.

- Lower interest rates generally favor gold by reducing the opportunity cost of holding non-yielding bullion, making it more attractive to investors in the current environment.

The catalyst for gold gains can be traced to the release of two critical economic reports. The Consumer Price Index (CPI) for August and the Producer Price Index (PPI), both issued by the U.S. Bureau of Labor Statistics because they provided the market with crucial insights. While neither report deviated significantly from consensus estimates, their combined impact bolstered trader confidence in the CME's FedWatch tool predictions.

Currently, the FedWatch tool indicates a 100% probability of the Federal Reserve initiating its first rate cut since the commencement of rate hikes in March 2022. This shift in monetary policy expectations has fueled gold's ascent, as lower interest rates typically boost the appeal of non-yielding assets like gold.

Gold continues to be supported by upcoming rate cuts by the Fed

- Gold prices remain strong, trading above $2500 per ounce. Central banks continue adding gold to their reserves, while geopolitical tensions and steady retail demand boost safe-haven investments, supporting near-record prices.

- Inflation data from the U.S. Consumer Price Index (CPI) report for August
confirmed a 0.2% monthly increase, which was in line with market forecasts. However, core inflation, excluding volatile items like food and energy, ticked up by 0.3%, exceeding the expected 0.2%. This raised concerns that inflationary pressures might persist longer than anticipated, influencing gold’s outlook.

- U.S. Treasury yields also climbed slightly on Thursday, as traders weighed the inflation data and upcoming rate decisions. The yield on the 10-year Treasury was up by over 2 basis points to 3.678%, while the 2-year Treasury yield rose to 3.672%. These higher yields could limit gold’s upside, as rising bond yields often compete with gold as a safe-haven investment.

Technical View
- Gold is likely to hold steady around the $2,500 level in the short term, especially if the Fed proceeds with a 25-basis-point rate cut.

Relationship between volume (Effort) and price movement (Result) to understand market behaviour

Effort: This is the trading volume, which shows the level of buying or selling activity.
Result: This is the price movement that happens because of that trading activity.

Interpretations

1. Effort Equal to Result:
High volume leading to a significant price move suggests the market is moving naturally in the trend's direction.

2. Effort Greater Than Result:
High volume with little price movement may indicate a potential reversal, as buying or selling pressure is being absorbed.

3. Effort Less Than Result:
Large price movement on low volume might suggest the move is weak and could reverse.

•Absorption:
- During trends, high volume with little price movement can indicate that big players are preparing for a move in the opposite direction.

•Climactic Action:
- A sharp price move on very high volume can signal the end of a trend.

•Testing:
- After a strong move, a small price change on low volume might confirm the trend's strength.

Rate Cut Speculation Fuels Gold Rally — Is $2,600 Within Reach?

- Recent speculation around potential interest rate cuts is setting the stage for a significant rally in gold prices. Fed Chair Jerome Powell's recent comments hinting at a possible shift in monetary policy have already triggered positive reactions across the markets, leading to increased interest in gold.

- Currently, traders are pricing in a 67.5% chance of a 25 basis point rate cut in September, with a 32.5% probability of a more aggressive 50 basis point reduction. If these cuts materialise, gold could see prices climb to the $2,550-$2,600 range. Despite a slight pullback from its recent high, gold continues to maintain strong momentum, driven by its appeal as a safe haven in a lower interest rate environment.

- While the overall outlook for gold is bullish, it's important to be mindful of potential short-term volatility. The classic "buy the rumor, sell the fact" scenario could lead to fluctuations, particularly as we approach the September rate decision. However, the broader trend remains supportive of higher gold prices in the coming months, with factors like geopolitical tensions, U.S. election uncertainties, and expectations of an extended rate-cutting cycle continuing to provide a strong foundation for gold's performance.

- While the overall outlook remains bullish, there is a possibility of short-term reversals, especially if geopolitical conditions change or if the Fed's policy signals shift.

Gold Market From Record Highs to Potential Correction


Fundamental Aspects
- Last week, the gold market experienced dramatic fluctuations, reaching record highs before a significant pullback.
- The surge was driven by expectations of a Federal Reserve rate cut in September, following comments from Fed Chair Jerome Powell and other officials.
- The probability of a rate cut soared to 98% according to the CME FedWatch Tool, pushing gold to an all-time high of $2,483.74. Mixed economic data, including cooling inflation and resilient retail sales alongside rising unemployment benefit applications, further supported gold's appeal as a safe-haven asset. Global factors, such as China's economic slowdown and geopolitical tensions, also contributed to the demand, with institutional investors increasing their holdings despite sluggish physical demand in Asia.

Technical Views
- As the week progressed, the market saw a "buy the rumor, sell the fact" scenario, leading to a more than 2% drop in gold prices on Friday due to profit-taking and a stronger dollar.

- Technical indicators now suggest a bearish outlook for gold, with potential for a significant correction. The weekly chart indicates a bearish closing price reversal top, which could result in a $200 to $250 decline from current levels. With the anticipated Fed rate cut likely already priced in, further upside appears limited, increasing the likelihood of a substantial pullback.

GBPUSD reached successfully TP +100pips✅ +5RR✅

EURUSD Target reached +100pips✅ +12.5RR✅

You don’t need to be the first buyer after a prolonged market downturn or the first seller after a strong uptrend. What truly matters and it will change your life completely is focusing daily on A++ setups with a potential 1:3 risk-reward ratio.💯

Gold Market View in depth | CPI Data

- Gold prices surged to one-month highs last week, driven by economic indicators and shifting market sentiments.

- June’s non-farm payrolls report showed 206,000 new jobs, surpassing expectations. However, significant downward revisions to May and April figures, coupled with an uptick in the unemployment rate to 4.1%, suggested a cooling labor market. These data points strengthened the case for potential Fed rate cuts.

Fed Rate Cut Probability Rises
- Market confidence in a September rate cut remained robust, with implied probability holding steady at approximately 72%. Traders began factoring in an increased likelihood of a second rate cut by December, further supporting gold prices.

Technical View
- The weekly chart reveals a strong uptrend in gold prices since October 2023, with the metal breaking out of a consolidation phase in February 2024.

Key technical levels to watch:
Support: $2,363.74 (50% level or pivot)
Resistance: $2,450.13 (All-Time High)

- Gold's short-term outlook is bullish due to expectations of Fed rate cuts, potential dovish signals from Powell, and softer inflation data. The price action suggests a potential test of the $2,450 level. However, traders should watch for surprises in economic data or Fed rhetoric that could alter this trend. A break below $2,363.74 could signal a reversal. Anticipated volatility requires traders to adjust strategies accordingly.


This week Catalysts and Forecast

- This week’s trading will likely be influenced by the June Consumer Price Index (CPI) report and Fed Chairman Powell’s two-day Congressional testimony starting Tuesday. Economists expect a 0.2% rise in headline CPI, with core CPI unchanged. Softer inflation data could reinforce rate cut expectations.

Dovish and Hawkish Statements

Dovish Statements:
- Support reducing or maintaining low interest rates to stimulate borrowing and spending.
- Support measures like quantitative easing to increase the money supply.
- Willing to accept higher inflation for the sake of economic growth.

Hawkish Statements:
- Advocate for raising interest rates to control inflation.
- Support ending measures like quantitative easing.
- Aim to keep inflation low and stable.
- Willing to slow economic growth to maintain stability.

For Investors:
Dovish policies can be favorable for stock and bond markets due to lower borrowing costs and increased liquidity. In contrast, hawkish policies can lead to higher borrowing costs and reduced liquidity, potentially cooling off asset prices.

For Borrowers:
Lower interest rates (dovish stance) mean cheaper loans for consumers and businesses. Higher rates (hawkish stance) result in more expensive borrowing costs.

For Savers:
Higher interest rates (hawkish stance) can benefit savers through higher returns on savings accounts and fixed-income investments. Lower rates (dovish stance) can reduce returns on these instruments.

For Gold or XAUUSD
Dovish policies, with their tendency to lower interest rates and increase inflation, can boost gold prices as investors seek it as a hedge against inflation and currency devaluation.

Hawkish policies can lower gold prices due to higher interest rates and a stronger currency, which reduce the appeal of gold as a safe-haven investment.

It’s crucial to avoid micromanaging and overanalysing charts and candlesticks. Spending too much time fixating on the same patterns and candles can lead to confusion. This might cause you to prematurely close a good trade because you’ve stared at the screen for too long and started seeing things that aren’t really there. Focus on your strategy, trust your analysis, and avoid the trap of overthinking each movement.

Ensure your trades align with the higher timeframe bias. This approach helps you to maintain a clear perspective