09 September 2016 at 8:27 GMT
- Gold investors not yet ready to chase the price higher
- Looking for support to emerge between $1,334 and $1,328
- Tactical traders are likely to enter longs in this area
The response to Draghi's dovishness shows how accustomed we've become to easy money.
By Ole Hansen
Gold rallied strongly this past week as weak US economic data helped send the dollar and bond yields lower. After finding resistance above $1,350 profit taking once again emerged following yesterday's European Central Bank meeting meeting where the institution's president, Mario Draghi, cooled speculation about further easing.
Although this did help weaken the dollar further, the lack of follow-through was a clear indication that gold investors are not yet ready to chase the price higher at this stage. US and German 10-year bond yields both jumped the most in a month as a clear sign of how dependent bond markets have become on ever easier monetary policies.
The Federal Open Market Committee meeting on September 21 is likely still to attract some attention. Despite recent weakness in economic data, such as the recent jobs report and manufacturing ISM, the FOMC may still opt to raise rates in order not to suffer too much of a credibility issue following recent hawkish statements.
In the short term we are looking for support to emerge between $1,334 and $1,328. Tactical traders are likely to enter longs in this area with sell stops below $1,321.
– Edited by Clare MacCarthy