Dollar rebound blocked gold prices continued to shock pattern

    Recently, in the federal Reserve easing expectations and the US dollar index has been bottoming out, gold price trend is still a high oscillation pattern.Since August, the gold price has fallen from a high of $2089 / oz, oscillating in the range of $1915-2000 / oz in the past three weeks, and the range of oscillation gradually converged.At present, the price of gold in the triangle tail oscillation finishing, waiting for a substantial breakthrough.  

The IMPROVEMENT in the U.S. economy is limited

    At present, the epidemic in the United States is characterized by a slowdown in the rate of confirmed cases, but the number of deaths continues to increase, and the negative impact of the epidemic on the US economy is still brewing.While the margin of return to work accelerated, growth in the service sector slowed, consumer confidence remained weak, the recovery in manufacturing was relatively weak, and policy bailouts and loose monetary conditions led to a surge in household saving and home buying.

    However, recent positive developments in the US economy have provided some support to the weak dollar index.The U.S. labor market has rebounded for the fourth month in a row, adding 1.371 million jobs in August, while the unemployment rate dropped sharply to 8.4 percent, the labor force participation rate rose to 61.7 percent, and average hourly monthly wages rose 0.4 percent.U.S. manufacturing activity also accelerated after rising more than expected in August.Meanwhile, durable goods orders, factory orders and other data also performed well in the United States, the U.S. economy's "Beige Book" showed economic activity increased in most regions, employment generally increased.

    Generally speaking, the current market has a high expectation on the prospects of economic recovery in the United States. However, the progress of economic recovery in the United States is constrained by the repeated outbreak of the epidemic in the United States and the protracted fiscal stimulus package in the United States.

Institutional holdings have been significantly reduced

    From the recent institutional positions, institutions on gold bullish expectations in the decline.Since late August, the world's largest gold fund, the SPDR Gold ETF, has lost 2.34 tonnes, while the CFTC gold non-commercial net long speculative net long position has fallen by 6,005 lots to 230,796 lots, including a significant reduction in long positions.

    After a sharp rally in the second quarter, institutional and hedge fund holdings of gold have recently begun to fall sharply, showing signs of profit-taking.Later, in the absence of continuous holdings, gold prices are difficult to pull up.

Physical demand was generally weak

    Global central Banks bought 8.9 tonnes of gold in July 2020, the lowest level since December 2018, while central Banks sold 17.7 tonnes of gold, the highest level since July 2019, and more central Banks sold gold than bought it, according to a new report from the World Gold Council.The sharp drop in net gold purchases by central Banks around the world reflects slowing purchases and accelerating gold sales amid record gold prices.

    Historically, central Banks' attitude to gold has also been an important factor.Global central Banks have bought more than 200 tonnes of gold on a net basis so far this year, contributing to the rally.At a later stage, if central Banks continue to sell gold, it will put pressure on prices.

Summary and aftermarket outlook

    In the short term, the rebound of the US dollar index and the reduction of institutional positions put some pressure on the gold price. However, The author believes that the gold price has limited downward space because: on the one hand, the US dollar index is still in the downward path.Until the US fiscal stimulus is in place and a vaccine is in place, the us recovery will be slow and the dollar index will struggle to achieve a substantial reversal.On the other hand, September will usher in the seasonal gold consumption season.As October and November will successively enter the Traditional festivals of China's National Day and India's Diwali festival, gold spot traders will surely purchase and prepare goods in advance before the arrival of the sales season, and the physical consumption of gold is expected to improve.Therefore, operation should not be too short of gold, short - term with oscillating market treatment.

    In the medium term, fed easing and the U.S. debt problem remain important factors supporting gold prices.The Fed's rate-setting meeting in mid-September will provide some guidance on the direction of future Fed policy.Against the backdrop of the current outbreak, the Fed's September meeting is expected to remain accommodative, which is an important support for gold prices.