Following the announcement that the US and China will resume high level talks in October, traders decided to book profits in gold and pushed this precious metal to the downside. The sell-off took price action below $1,500, but selling pressure started to recede as forex traders shifted the focus to the ECB meeting this week. Global central banks have increased their gold purchases which is supporting a longer term uptrend and as the global economy continues to cool further, gold is favored to reverse back to the upside and continue its rally. Is it time to re-enter the gold rally? Subscribe to the PaxForex Daily Fundamental Analysis and earn more pips per trade.
Central banks are starting to pump more stimulus into the economy and are weakening their respective currencies. This is further providing a boost to gold and limits the downside potential. Economic data out of Asia showed a rebound in the Japanese economy as measured by the BSI Large All Industry while Australian consumer confidence contracted in August. With the US Fed expected to cut interest rates again this month, forex traders will pay close attention to the US PPI today. Will gold be able to recover to the upside off of strong support levels? Today’s fundamental analysis will take a look at the upside potential as well as the downside risk of gold.
Here are the key factors to keep in mind today for Gold trades:
- New Zealand Migration: Permanent/Long-Term Migration for July was reported at 5,100. Forex traders can compare this to Permanent/Long-Term Migration for June which was reported at 3,990. Visitor Arrivals for July increased by 1.3% monthly and External Migration & Visitors increased by 2.0% monthly. Forex traders can compare this to Visitor Arrivals for June which decreased by 0.1% monthly and to External Migration & Visitors which increased by 0.6% monthly.
- Japanese BSI Large All Industry Index and BSI Large Manufacturing Index: The Japanese BSI All Large Industry Index for the third-quarter was reported at 1.1 quarterly and the Japanese BSI Large Manufacturing Index was reported at -0.2. Forex traders can compare this to the Japanese BSI All Large Industry Index for the second-quarter which was reported at -3.7 and to the Japanese BSI Large Manufacturing Index which was reported at -10.4.
- Australian Westpac Consumer Confidence: Australian Westpac Consumer Confidence for September decreased by 1.7% monthly to 98.2. Forex traders can compare this to Australian Westpac Consumer Confidence for August which increased by 3.6% monthly to 100.0.
- US PPI: The US PPI for August is predicted flat at 0.0% monthly and to increase by 1.7% annualized. Forex traders can compare this to the US PPI for July which increased by 0.2% monthly and 1.7% annualized. The US Core PPI for August is predicted to increase by 0.2% monthly and by 2.2% annualized. Forex traders can compare this to the US Core PPI for July which decreased by 0.1% monthly and which increased by 2.1% annualized. The US Core PPI ex Trade for August is predicted to increase by 0.2% monthly and by 1.7% annualized. Forex traders can compare this to the US Core PPI ex Trade for July which decreased by 0.1% monthly and which increased by 1.7% annualized.
- Canadian Capacity Utilization Rate: The Canadian Capacity Utilization Rate for the second-quarter is predicted at 82.0%. Forex traders can compare this to the Canadian Capacity Utilization Rate for the first-quarter which was reported at 80.9%.
- US Wholesale Inventories and Trade Sales: US Final Wholesale Inventories for July are predicted to increase by 0.2% monthly. Forex traders can compare this to previous US Wholesale Inventories for July which increased by 0.2% monthly. US Wholesale Trade Sales for July are predicted to increase by 0.2% monthly. Forex traders can compare this to US Wholesale Trade Sales for June which decreased by 0.3% monthly.
Should price action for Gold remain inside the or breakout above the 1,484.40 to 1,497.45 zone the following trade set-up is recommended:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 1,493.00
- Take Profit Zone: 1,556.75 – 1,590.10
- Stop Loss Level: 1,479.80
Should price action for Gold breakdown below 1,484.40 the following trade set-up is recommended:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 1,474.00
- Take Profit Zone: 1,430.00 – 1,439.00
- Stop Loss Level: 1,484.00
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