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Weekly Summary (04/10/2021)

Gold rise to high position from 1721, buying side remains optimistic in short term market

Gold prices fluctuated greatly in last week and was rising from the lowest 1721 to 1764. Affected by the fundamentals of the US dollar market fluctuates greatly. The dollar first rose from low position last week which seriously depressed the gold price. With the shock of the US dollar index at the end of the week, the gold price was supported and rebounded and finally ended in a high consolidation form. In addition, the impact of the epidemic on the global supply chain and logistics lines, the market's perception of inflation and the expectation of US dollar interest rate hike also comprehensively affect the price of spot gold.

The global economy has not recovered from the epidemic and the growth still slow. The Federal Reserve has expected to reduce the economic stimulus policy caused by the epidemic at the end of the year. At present, inflation is growing rapidly near the end of the year and the implementation of the reduction policy seems to be imminent. The Fed may gradually withdraw and reduce market stimulus policies this year such as reducing bond purchases which increasing the risk of pressure on gold prices.

Powell previously claimed that as the U.S. economy extricates itself from the epidemic, the continuous rise in prices and employment difficulties may not disappear immediately which also belong to the the stimulus policy. The Federal Reserve also said it would take action on these adverse effects when necessary. Some local officials of the Federal Reserve said that the stimulus policy should be reduced or even withdrawn as soon as possible, because the impact of the epidemic has recovered to a considerable extent. In order to avoid the impact of the continuous stimulus policy, bond purchase should be reduced at least in November.

Although the US dollar rose last week it still fell heavily after week finishing. The performance is a boost factor but it is still weak on the whole. If the Federal Reserve makes comments or decisions to limit the stimulus plan this week or even further strengthens the expectation of raising interest rates, the dollar will be boosted and strengthened which will put a great pressure on gold prices. If the argument of continued easing within the Federal Reserve is supported and inflation has not reached the level of interest rate increase, it is more favorable to the rise of gold price. There is no doubt that the current market is dominated by the direction of the dollar and the comments of the Federal Reserve. We mainly need to see whether the non-farm employment data on Friday continues to grow aggressively, which will have a decisive impact on the tone of the Fed this year.

Overall, the US dollar is currently at a mid-line low and gold more likely to finish horizontally in 1750-60. We need to pay attention to the short-term impact of epidemic vaccines and specific drugs, resulting in large price fluctuations. It is not suitable to hold heavy positions in this week.

Technical analysis: MACD indicators deviate and gold price may obtain short-term support

In the early part of last week, the gold price was supported. The MACD energy line rose sharply twice, the fast and slow lines also crossed the zero axis in the middle of the week and pierced upward and there was a deviation at the end of the week. The energy line showed that the kinetic energy was insufficient and the fast and slow lines were still entangled above the zero axis. The short-term trend was uncertain, and there was a great possibility of upward shock but the range would be small.

The brin belt has a large opening in the price rise range but the price has not touched the upper track line. It has been shaking slightly in the upper track space. It only touched the middle track line at the end of this week, entered the upper track range and left the upper track line at the end. At the end of the week, the brin belt gradually shrank, and the price returned to a stable level, but it was still at the high level of last week.

Important information this week:

Monday: 22:00 Final value of durable goods order rate in August (%)
Wednesday: 20:15 US ADP employment in September (10000)
Thursday: 20:30 Initial jobless claims in the United States for the week ended October 2 (10000)
Friday: 20:30 After the quarterly adjustment of non farm payrolls in September (10000)

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