Key Takeaways:
Gold futures have climbed 8% this month, capping a 7.1% weekly gain, as traders await July CPI data that may trigger profit-taking from record speculative longs.
Bespoke Investment Group said gold closed above its 50-day moving average by one standard deviation for the first time in 103 trading days, a signal historically followed by negative returns. In prior instances after 100-plus sessions without an overbought close, gold fell an average 0.22% over the following week, 0.34% over a month and 0.53% over three months, with only 37% of cases posting positive returns after a year.
HSBC's James Steel, chief precious metals analyst, said in an Aug 11 report that gold's uptrend is "structurally intact" but that $4,500 an ounce is strong resistance, with the market likely to consolidate before another push higher. Steel warned that a CPI reading that is not sufficiently "mild" would give recent longs a reason to take profits.
The July CPI report, due Aug 12 at 8:30 a.m. ET, is the immediate catalyst. HSBC economist Ryan Wang forecasts core CPI rising 0.21% month-over-month, easing to 2.5% year-over-year from 2.6%. CFTC data as of Aug 4 showed Nymex gold speculative net longs at 22.65 million ounces, up 1.42 million ounces, with total longs of 27.15 million ounces — a concentrated position that could accelerate any pullback.
Overbought Signal After 103 Sessions
Bespoke's analysis, cited by CNBC, marks the first overbought close since March 10. The relative strength index sits near 72 on the four-hour chart, above the 70 threshold that typically flags stretched momentum. Spot gold reached $4,434.84 an ounce on Aug 11, its highest since June 5, before Reuters reported it at $4,374.82 at 5:48 a.m. GMT, with US futures at $4,435.
CPI as the Catalyst
The market expects July headline CPI to rise 3.4% year-over-year, down from 3.5% in June, with core easing to 2.5% from 2.6%. June's report showed headline CPI falling 0.4% month-over-month, the first decline since April 2020, driven by a 5.7% drop in energy prices and a 9.7% plunge in gasoline. Cleveland Fed President Beth Hammack said it is time to begin gradual rate increases to avoid larger moves later, a stance that has already pressured gold from above $4,400.
The Fed held its benchmark rate at 3.5%-3.75% on July 29 in a 9-3 vote, and CME FedWatch data shows the probability of a September hike at 44%, down from about 67% before the July jobs report showed a 23,000 decline in payrolls. Silver traded at $64.24, up 1.08%, with the gold-to-silver ratio compressing to 67.68 from 68.32. The VIX, near 15, has fallen roughly half since April, a level HSBC said is not necessarily negative for gold if it reflects expectations of oil returning to pre-conflict levels.
This article is for informational purposes only and does not constitute investment advice.
