Gold saw a strong rally from uptrend support and the move sets the precious metal up for further gains. The gold price had been heading lower for a third-straight day, which was hinting at lower prices but a test of the support led to a sharp rally higher.
A key driver of the gold price rally has been Exchange Traded Fund (ETF) inflows. Gold ETFs closed the first half of the year with a record $40 billion of net inflows. Gold ETFs buy more physical gold when they receive inflows in order to ensure that the ETF is backed by bullion at the correct ratio. Fidelity noted recently that overall ETFs, including stocks and bonds, were touching assets under management of $4 trillion, which included $130 billion in the second quarter of 2020.
The economic calendar today sees the Q2 GDP result for the U.S. and this could move the market if it varies significantly from previous estimates. Today also marks the beginning of the Federal Reserve’s two-day Jackson Hole economic event, where over 100 delegates will discuss economic policy. The event can be market-moving because financial television channels are usually on hand to interview officials and the market can get some hints on future policy goals. Federal Reserve chair Jerome Powell is expected to speak later this afternoon as the event gets underway.
Tomorrow afternoon will see the release of Core PCE Prices for the United States and this could be a driver for the price of gold if market expectations for inflation undershoot. Analysts are expecting a figure of 1.2% for July prices, which is higher than last month’s 0.9%.
Gold Technical Outlook
The gold price rallied from support at $1904 yesterday and closed $50 higher at $1955. The price has since given up $12 of those gains today, but there is the potential for gold to continue the recent rally. A break above $1955 will target the $2000 level again. If the Federal Reserve or inflation figures hurt the gold price outlook then the $1904 uptrend line could give way for a retest of the $1863 horizontal support.