Federal Reserve Rate Meeting Approaching, Can Gold Withstand Short-term Pressure?

Gold may experience short-term consolidation as it awaits guidance from significant economic events. Resistance levels are at $1930 and $1945, while support levels are at $1900 and $1885. The market has already priced in the expectation of a pause in rate hikes for September, but an increase in expectations for November could temporarily suppress gold's rise. Furthermore, based on CFTC positioning data and technical analysis, the medium to long-term downtrend in gold remains unchanged, suggesting possible short-term consolidation.

Last week (Sep11-17), precious metals have shown a mixed performance, with gold slightly down by 0.1% and silver down 0.2%. Gold initially fell but rebounded in the last two days of the week. Influenced by CPI and PPI data exceeding expectations, gold experienced a temporary decline, finding support near $1900 before continuing its upward trend and ultimately closing at $1923.57.

Source: MacroMicro - Percentage Change of Major Precious Metal futures in Sep 11-17 

On September 13th, the US Bureau of Labor Statistics released the August Consumer Price Index (CPI), which showed a YOY increase of 3.7%, surpassing the expected 3.6% and the previous value of 3.2%. This marked the second consecutive month of rebound in YOY growth.

Additionally, the MOM CPI increased from 0.2% in July to 0.6%, in line with expectations and representing the largest increase in 14 months. Gasoline prices rose by 10.5%, driving the overall growth.

Excluding food and energy, the core CPI increased by 4.3% YOY, slightly lower than July's 4.7% and in line with expectations. However, the core CPI's MOM increase slightly rose from 0.2% in July to 0.3%, slightly exceeding the expected value of 0.2%.

The Producer Price Index (PPI) for August also exceeded market expectations when announced the day after the CPI data.

According to data released by the US Department of Labor, the PPI increased by 1.6% YOY in August, surpassing the market's expected 1.2% and the previous value of 0.8%, marking the second consecutive monthly increase. Excluding volatile food and energy prices, the core PPI increased by 2.2% YOY, in line with market expectations but lower than the previous value of 2.4%. The growth in August PPI was mainly driven by rising energy and transportation costs.

Among them, the final demand index for goods rose by 2.0% in August, marking the largest increase since June 2022. Energy prices for final demand surged by 10.5%, contributing to a more than 60% increase in the index.

Mitrade Analyst 

After the release of the aforementioned data, gold experienced two setbacks, briefly falling and touching the $1900 level. However, gold ultimately found support around $1900 and rose for two consecutive days, yet it has not completely broken through the resistance near $1930.

Positive US CPI and PPI data indicate that inflationary pressure still exists in the US, leading the market to have greater confidence in the possibility of a soft landing for the US economy, reducing the demand for safe-haven assets and exerting downward pressure on gold. In addition, inflationary pressure may prompt the Fed to consider the possibility of raising interest rates.

In recent times, speculative long positions in gold have decreased, while short positions have increased accordingly. According to the updated CFTC position data from Sep 6-12, speculative long positions in gold decreased slightly by 14,142 to 123,864 compared to the previous period. During the same period, open interest in gold futures showed a minor reduction of 98 in speculative long positions to reach 235,704, while short positions increased by 14,044. These indications suggest that short-term market investors have a bearish view on the future of gold.

Mitrade Analyst 

Considering the decrease in speculative long positions and the corresponding increase in short positions, as well as the slight reduction in long positions among open contracts, it can be inferred that investors hold a cautious outlook on the future of gold. Therefore, gold is likely to experience consolidation or volatility this week.

From a technical standpoint, the 60-day MA shows a downward trend. The 14-day RSI value of 54 is lower than 60. The MACD daily line indicates a short-term upward crossing of the longer-term line, with the histogram gradually decreasing below the zero line. The DIFF and DEA values are negative, while the MACD is positive, suggesting that gold may undergo consolidation or volatility in the short term.

Resistance levels: 1930, 1945

Support levels: 1900, 1885

Source: Investing.com, Sep 18th Gold Daily Chart

Mitrade Analyst 

Considering the analysis of various indicators, the overall downtrend in gold's medium and long term remains unchanged. In the short term, gold is expected to experience slight consolidation or oscillation, awaiting significant events to provide direction.

Additionally, investors need to pay attention this week to news and economic data that may guide the future trend of gold, such as the Fed interest rate decision, economic projections, and press conferences.