Gold Continues Its Rise Amid Economic Turbulence: New Week Insights and Forecasts

Gold and Oil Prices Amid Rising Geopolitical Tensions and Economic Data:

Gold prices surged above $2,460, peaking at $2,477, before falling to $2,420, driven by weak US labor data and escalating geopolitical tensions in the Middle East. The US Nonfarm Payrolls (NFP) for July missed expectations, adding only 114K jobs compared to the estimated 175K, with previous figures revised downward. The unemployment rate rose to 4.3%, and average hourly earnings grew at a slower pace, indicating a cooling labor market. This fueled speculation about potential interest rate cuts by the Federal Reserve in September, causing US Treasury yields to drop to a six-month low near 3.82%. The US Dollar Index also fell to a four-month low near 103.30.

Despite the rise in gold prices due to lower yields reducing the opportunity cost of holding non-yielding assets like gold, they faced pressure due to concerns about the overall economic outlook. Geopolitical risks also contributed, with tensions escalating in the Middle East after an airstrike killed Hamas leader Ismail Haniyeh in Tehran, increasing safe-haven demand for gold. Banks like Bank of America, Citi, and JP Morgan anticipate more aggressive monetary policy easing, with some expecting a 50 basis points cut in September and November.

Gold Stocks Performance:

Gold stocks experienced significant fluctuations. Rising geopolitical tensions and weak economic data initially bolstered gold prices, driving up gold stocks. However, as gold prices retreated from their highs, gold stocks also faced pressure. Market speculation about Federal Reserve interest rate cuts and fluctuating investor sentiment influenced their performance.

Commodity and Metal Prices:

Copper and other base metals, along with agricultural commodities like corn, have seen significant price drops. Copper prices have fallen nearly 20% from their record high in May due to flagging Chinese demand and abundant supplies. Investors have unwound bullish bets on commodities, driven by a dimming outlook for growth in China and lack of significant policy support. China's manufacturing activity has been contracting, and much of the copper purchased earlier this year has been stockpiled rather than used. The overall sentiment towards commodities remains negative, with expectations for Chinese demand growth diminishing and global economic uncertainties weighing on prices.

Commodities from copper to corn have been tumbling as fund managers cut around $41 billion of bullish bets on natural resources. The sell-off in copper, a bellwether of the global economy, has been particularly stark, down close to 20% from its record high in May. Other base metals such as aluminum, lead, and zinc have followed suit, while corn has dropped to its lowest level since October 2020.

Traders’ bullish positions on commodities have dropped 31%, or $41 billion, from a late May peak to July 30. The widespread sell-off marks a sharp reversal from just over two months ago when some commodities reached record highs. Expectations for Chinese copper demand growth have been shattered, with the market oversupplied and net imports at 13-year lows.

China's Third Plenum wrapped up in July without major support for the country’s property sector, leading to further declines in commodity prices. The property market slump has significantly reduced steel demand, and a firm US dollar, market gyrations, and weak economic growth in other parts of the world have all weighed on commodity prices.

Smart Money Indicators

You can see from the COT data the big institutions overall are still long, however there was a significant amount of long positions removed vs short. Also a significant decrease in open interest signaling a bearish bias when looking for a swing trade this week.

Looking at the non commercial COT vs retail positioning. We can see smart money had a sell off July 16th after reaching new all time highs. We just reached new all time highs Friday.. what do you think will happen?

Retails positioning on metals

Retail is aggressively long on copper + looking at fundamentals with china copper is bearish. Looking from a daily chart copper is bearish. Plus analyzing COT data the big institutions are removing long positions & adding to shorts this week. With this in mind we can expect a potential Bearish SMT across copper & gold with copper being the leading bearish metal.

With all this information in mind, still yet before we look at technical analysis. Let's view the upcoming economic calendar

Expecting potential reversing points Monday & Thursday. Possibly taking out all time highs again M -W removing any early sellers before price distributes downward. Or maybe we don't hit new all time highs but experience some sort of chop then drop. Sticking with a bearish bias in mind, due to a new moon taking place Monday, The perfect scenario would be 10am Mondays news creates a judas swing fake out & we can hold a trade into Thursday.

The Technicals

We have bearish SMT on the monthly for the start of August, a 600 - 1000 point drop from this area would be a healthy pull back. Looking at silver, there is plenty of space for a healthy pull back as well. https://www.tradingview.com/x/AiuEoKmo/

On the weekly chart we have bullish SMT from the start of last week that kicked off golds surge in price. That being said the bearish monthly SMT is too early in price to determine a strong signal. With silver bouncing off a strong key zone, copper as well but we will see how fundamentals drive future price, according to COT data we can look forward to shorts. Indicating that maybe we're just early on a great sell signal from the monthly? https://www.tradingview.com/x/XvSaj7Ev/

Due to seasonalities gold typically rises in August, will we see a pull back early in the month before launch? We also have a new moon Monday which is typically a sell signal.

On the daily chart we also have bearish SMT. Remember when I was sharing my COT analysis I said we can look for bearish SMT against copper & gold.. well that is exactly what we have. I've collected data myself on the fine details of seasonalities on gold, there is a 63% chance in August we will have a bearish leg. Will this be it? https://www.tradingview.com/x/XhuWcwnl/