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Gold accumulates volume before big macro data

Gold's side move shows the significant accumulation of volume before inflation data at the end of the week.

Side move around support level

After breaking a downtrend in the middle of May, gold has stayed in a 3 weeks long side move. Last week’s volatility was 2.64%, but the week’s performance was -0.26%. This only underlines neutral territory for the price of the yellow metal.  The chart below should be familiar from previous articles we analysed. We watched the continuous development from breaking the downtrend, setting a support level, and defining side moves (blue rectangle). 

We have informed about this topic: Gold accumulates volume around support level

Gold's side move, 30 minutes chart of GC (Gold futures). Source: Author's analysis

Gold’s side move, 30 minutes chart of GC (Gold Futures). Source: Author’s analysis

The weekly performance of Gold. Source: finviz.com

The weekly performance of Gold. Source: finviz.com

Big macro data ahead

One of the reasons why gold is currently in the side move could be waiting for big macro data from the US. Markets await inflation data to be released by The Bureau of Labor Statistics (BLS). 

Read more about Friday’s data: US bond yields advance after jobs data, await US CPI

U. S. Consumer Price Index (CPI) YoY. Source: bls.gov

U. S. Consumer Price Index (CPI) YoY. Source: bls.gov

The question is, why is inflation so important for gold’s price development? The answer is, that inflation data will hint next Fed’s steps for the monetary policy. There should be an equation: higher inflation data = higher interest rates. And gold is a non-interest financial asset. Therefore, higher rates do not work for yellow metal’s appreciation, because gold is, simply, not so attractive in comparison to assets with interest. Despite this, the visible side move on the chart shows that orders cumulate around 1850$ with approximately 2.50% volatility. This accumulation lasts for almost three weeks, which means the market is getting ready for big macro data, which could set another trend for precious metals. 

Tomas is a professional trader and money manager on foreign exchange market from 2014. His main domain are commodities. Experiences gained due this period are transformed to consul...

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