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Fundamentals

In Wednesday's (August 16th) Asian session, spot gold oscillated narrowly, and it is currently trading at 1905. The U.S. retail sales data (known as 'horror data') for July was strong, and the market expected the Fed to maintain high interest rates for a longer period. Thus, the USDX moved higher above 103, while U.S. bond yields continue to refresh a high for nearly ten months. Instead, gold prices declined under pressure, once fell to 1897. Then, it got support and rebounded quickly to 1903, and maintained oscillating at lows.

Data: U.S. retail sales rose 0.7% MoM in July, exceeding market expectations of growth of 0.4%. It was the largest increase since January 2023, achieving four consecutive months of growth.

Focus: The minutes of the Fed's monetary policy meeting will be released at midnight, and investors need to focus on it. In addition, the annualized U.S. building permits, the annualized U.S. housing starts data, and the U.S. industrial production data for July are worth attention.

Technical Analysis

Daily chart: Gold continued to shock downward with oscillations, it tended to cross below 1900 after the data was released, then quickly rebounded, and tested the resistance above 1910. However, gold recovered during the latter half of the night and declined back to 1900, closing the daily chart negatively. In addition, it was emphasized yesterday that even if the data declines below 1900, investors should not chase the decline, but go long with small positions after gold rebounds to 1902. Now, gold has reached important support near 1900, and short-selling was completed during the depreciation yesterday. Moreover, there is a bullish divergence at the bottom, and the bearish momentum has been exhausted after the continuous depreciation, gold is likely to stop declining in this position technically. Nonetheless, the gold price has been moving under the 5-day SMA for many days, showing a significant lack of confidence in gold bulls. Even if gold stops plunging at 1900, a rebound will need support from fundamentals, that is, whether unexpected data will be released in tonight's Fed meeting minutes. If the Fed's stand is hawkish, gold will maintain a weak pattern and drop back below 1900. If the Fed's stand is dovish, or not hawkish enough, gold may stop falling and rebound at 1900, and oscillate at the 5-day SMA (1908). Then, the upper resistance will be at the 10-day SMA (1920), and the lower support should be at 1895.

Trading recommendations: Buying at lows. If gold retraces to 1895 today, investors could go long with small positions and set the stop-loss at 1890. To take profits, the first target will be the 5-day SMA (1908), where investors could move the stop-loss to breakeven. Moreover, the second target will be 1920. If gold fails to stand above 1900, investors should not chase the depreciation, but keep watching, it is recommended to go long shortly after gold gets stabilized under 1900.

Trading Recommendations

Trading direction: Long

Entry price: 1895

Target price: 1920

Stop loss: 1890

Support: 1900.000/1895.000

Resistance: 1908.000/1920.000