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Fundamentals

During Tuesday's (August 22nd) Asian session, spot gold narrowly oscillated, and it is currently trading near 1895. Yesterday, US. bond yields continued to rebound, with the 10-year U.S. bond yield exceeding 2% for the first time since 2009. Besides, the dollar grew slightly higher, but then declined from highs, setting gold prices back to 1885 again. Gold was supported and rebounded due to some bears taking profits before this week's Fed officials' speech and Jackson Hole Economic Symposium. In addition to investor concern about the global recession, the support from buy-the-dips would help gold to build a bottom recently. From the medium and long term, the dollar is hard to remain high for a longer period, while Goldman Sachs recently warned of a possible government shutdown on September 30th. According to Goldman Sachs estimates, during the Fed government shutdown period, the U.S. GDP growth rate will drop by 0.2% each week, and it is just the beginning that high interest rates shock the U.S. economy. For the gold price, it will oscillate shortly to find the bottom. As the bottom gets firmer, the future rebound will be smoother.

Key data: The U.S. Existing Home Sales data for July and Richmond Manufacturing Index for August.

Technical Analysis

Daily chart: Gold did not move much yesterday. Despite a bearish trend, gold rebounded a bit. Since gold touched the low near 1885, it rebounded twice to 1898 by 12 dollars. More importantly, gold did not depreciate continuously but appreciated to 1895. Therefore, gold was not weak yesterday, and it is better not to go short. Technically, gold ended the continuous declined at 1885 on Monday, suggesting a bullish rebounding signal. But a single positive pattern in the daily chart is not sufficient, gold must stabilize above the 10-day SMA to achieve an on-going growth. Furthermore, the resistance above will be determined according to the resistance at the 10-day SMA (1900), the psychological level for bulls and bears. If gold crosses above this level, gold will keep appreciating and reach the range from 1910 to 1920.  

Trading recommendations: Buy at lows. If gold retraces to 1892 today, investors should go long with small positions. However, if gold keeps declining to 1886, investors could cover the positions. Moreover, the stop-loss will be near 1884, and the first target to take profits will be 1902, where investors should move the stop-loss to breakeven. Then, the second target will be at 1910.

Trading Recommendations

Trading direction: Long

Entry price: 1890

Target price: 1902

Stop loss: 1884

Support: 1892.000/1885.000

Resistance: 1900.000/1910.000