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  • Gold is consolidating and awaits the FOMC outcome next week.
  • The DXY is also consolidating and needs a break back to 9570 if gold bears are going to continue lower.  

Spot gold continues to chug along in a sideways drift while the DXY’s range squeezes in between 94.70 ( a cent below possible upside break up territory) and 94.30 whereby markets continue to concentrate on positive data drivers that are underpinning risk-on sentiment. Global equities are driving higher with treasury yields up a couple of basis points.

Shares in Europe up 0.3-0.6% and shares in the US higher, outside of tech. DJIA gained 158.80 points, or 0.6%, to 26,405.76 – The index is now just 1% from its all-time closing high.
The 10-year yield was up 2bps while global yields have also been generally higher. Gold is up 0.35% at the time of writing close to USD1,204/oz. Gold futures gained Wednesday, leaving the contract to finish above the closely watched $1,200 line for a seventh straight session as traders await the outcome of next week’s FOMC.

Analysts at Standard Chartered Bank offered their outlook for next week’s FOMC meeting:

“We expect the FOMC to upgrade its median real growth projection at the September meeting, and see a decent chance that the Committee’s median non-accelerating inflation rate of unemployment (NAIRU) estimate will decline too. However, we believe that for the rest of this year, the median ‘dot plot’ (FOMC FFTR projection) will continue to understate what the FOMC will ultimately do in 2019, with the median dot plot for 2019 reflecting four rather than three hikes only in March or June 2019, mirroring the 2018 dot-plot evolution. The Committee likes to upgrade its FFTR outlook gradually to avoid abrupt tightening in financial conditions. Unforeseen risks could emerge in 2019, but, we believe the FOMC sees the US economy as less fragile than investors do. Moreover, we expect the FOMC to keep hiking even if core inflation remains benign. Since monetary policy works with a lag, we believe the Committee will be compelled to respond to accelerated growth momentum to keep inflationary pressures and financial stability risks in check.”

Gold levels

Gold remains in a sideways consolidation between 1214 and 1182. The market is heavily short of gold and to reconsider its positioning, (net speculative short positions, or bets an asset’s price will fall, in gold, are up 275% year to date). The dollar is also weak though. However,  bulls  need to get and hold above the 50-D SMA at 1211 to convince and then close above 1214 which is resistance and then the 200-W SMA at 1233 will need to be challenged. Currently, the price oscillates with a bullish symmetrical triangle and otherwise, a retry of the downside now should target 1146/20 monthly levels.