Gold: Fed Powell adding to the recipe for lower prices

Spot gold has been sliding to a $1,196 low in early Asia on the back of very late NY session comments from Fed’s chair Powell who sent the dollar onto the 96  handle  with hawkish rhetoric after a US session that printed strong US economic data once again. Gold currently trades at $1,197 having made a high of $1,208.52 and a low of $1,196.55.

Comments from Powell have sparked a broad-based  bid in the rally and they came as follows:

• Fed’s Powell: U.S. economy ‘remarkably positive’
• Fed’s Powell: May raise rates past ‘neutral’
• Fed’s Powell: Not really seen any impact yet from trade disputes

“The U.S. 10-year traded as high as 3.18 percent on Wednesday, the highest in  seven years, spurred by the surging U.S. economy and a determined Fed. Treasury rates are entering the range of consequence, where higher interest costs will begin to have an economic impact,”    Joseph Trevisani, Senior Analyst at FXStreet explained  who commented earlier on the US data saying,  “healthy growth in ADP employment will keep expectations intact for a robust September employment report on Friday with expectations reaching beyond the 188,000 consensus forecast, and, “”Record levels of business optimism combined with the very strong ADP report, point to a further acceleration in the already robust job market in Friday’s payroll report.”

US economic  divergence  to underpin the dollar

The US economy is performing streaks ahead of China,  the Eurozone, UK and the Antipodes. As such, the dollar can continue higher and trade wars are likely to continue  to underpin its strength.   Similarly, investors are likely to be attracted to rising US yields and in a world of political as well as economic  uncertainty, it is the dollar and dollar-denominated assets that will attract the most demand and investors idle cash – mixed with a hawkish Fed, that is a recipe for lower gold.  

Gold levels

The technicals lean bearish with a bearish bias on the RSIs. Gold bears are back in the picture with eyes on the 61.8% Fibo at 1180 and the   76.4% Fibo at 1172   – (These Fibos are taken of the early Aug 1159 lows to 27th August 1214 highs). $1,160  was the start of the retracement back on 15th August    – 2018 low, (lowest  since Dec 2016 prices).