- Gold stretches through the trendline resistance to meet the 200 4-hour moving average.
- Bulls and bears will now await the Fed and are keeping an ear to the ground for tariff news.
Gold has been on the rise in the US session as we approach the Federal Reserve’s interest rate decision, taking on the 200-hour moving average having broken through the short term trend-line resistance. The yellow metal currently trades at $1,470.57 at the time of writing, having travelled from a low of $1,462.77 to a high of $1,472.93. At the time of writing, gold is up 0.44%.
It’s Fed day, which means one of three things, either US interest rates will rally, drop or remain balanced on what the markets have already factored in. We are highly unlikely to get a change in interest rates but the dot plot will be scrutinised for where rates are expected to be in 2020. Markets are expecting that there will be messaging from Powell while will continue to reiterate that a material shift would be needed to adjust policy further.
However, analysts at TD Securities argued that they continue to see the Fed’s reaction function as asymmetric. “They will either cut rates further if growth disappoints or stay the course if growth recovers, ultimately pressuring real rates further.”
“This lends strength to the view that gold will continue to bounce higher into 2020 as momentum strategies make a comeback “” CTAs are eyeing a break north of $1513/oz to add to their length.”
Elsewhere, the main focus is on US President Donald Trump and whether he is going to announce that scheduled tariffs on Chinese imports will go ahead or not on the 15th of December. This is a major theme for risk of markets including precious metals and USD/JPY traders await the Fed and tariff news, US dollar on thin-ice – more emphasised there.
Gold levels
Bulls have broken into crucial territories at the 200 4-hour moving average located around the highs of the day, 1472. This is also a 23.6% Fibonacci retracement level, taking into consideration the YTD highs and recent swing lows. 1485 and prior highs guard 1490 as the 38.2% Fibo od said range and the mean reversion comes in at 1503 – another familiar resistance level. On the downside, the 6h Dec lows comes in at 1458.77 as a key target.
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