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  • Spot gold has been in consolidating within the familiar sideways channel meeting a recognizable resistance at $1,204 and up from yesterday’s commonplace support down at $1,194.
  • The greenback has been mixed but the FOMC is an event that could well set the tone for the foreseeable future for both the gold market and the dollar.  

Gold has been enjoying some long-awaited support after a period of five month’s of supply from up at $1,360/oz that reached a low of $1,172. The dollar has been the driver in the metals recovery as markets morph out of risk-off to risk-on with respect to trade wars and EM-FX which has sent the greenback from 96.98 down to a recent low of 93.81, despite yields basing on the 3% mark in the 10-years. In fact, US yields continued to range sideways around a four-month high overnight, between 3.06% and 3.09% while the 2yr yields, more sensitive to Fed expectation nudged 2.83% – a fresh high since 2008.  

FOMC outlook

With respect to the Fed fund futures yields, these continued to price 100% chance of a hike this week while the chance of another hike in Dec is priced at 90%. Much will now depend on the Fed’s dots and median forecast, but anything uber-dovish could well see a huge unwind in the greenback and gold at these levels will all of a sudden look like good value and it may even take up market’s preference for its safe-haven status again which would put it on course for a sizeable reversal. On the other hand, should the FOMC event be taken as more hawkish than expected, the dollar is likely to take back its title on the board of FX and weigh heavily on gold leading to a potential breakout of this extended period of consolidation

Gold levels

Gold keeps hovering around $1200 no matter what

 Valeria Bednarik, Chief Analyst at FXStreet explained that rthe metal maintains a neutral stance according to the daily chart, as the price remains stuck to a flat 20 simple moving average, while the Momentum indicator eases around its mid-line and the RSI consolidates at 49:

“In the short term, according to her, the 4 hours chart, shows XAU/USD developing within a congestion of directionless moving averages and the Momentum indicator advancing below 100 and the RSI moving south, at 46, “also failing to provide directional clues.”

Gold Technical Analysis: 3-week old tight trading can lead to explosive breakout