- Spot gold was slammed on the FOMC outcome, extending its decline from pre-announcement highs located at $1,258/oz to a post-event low of $1,243 and change on the ounce.
- As for the front-month contract, February gold ended the session up $2.80, or 0.2%, at $1,256.40.
As expected, the Federal Reserve hiked rates following unanimous at the FOMC. Rates were raised by 25 basis points to 2.25% – 2.50%. The Statement came with little new, repeating that risks to the economy appear ‘roughly balanced’ and will “continue to monitor economic and financial conditions for their effects on the economic outlook.” However, the Fed forecast two hikes in 2019, above where the street has priced which fulled a rally in the greenback. There was also a boost to growth forecasts while inflation forecasts were unchanged – (DXY rallied from 96.61 to a high of 96.96).
- Federal Reserve’s FOMC statement – Dec. 19 – full text
- FOMC raises the target for fed funds rate by 25bp to 2.25% – 2.5%
GDP forecasts:
- 2018 3.0% vs 3.1%
- 2019 2.3% vs 2.5% prior
- 2020 2.0% vs 1.8% prior
Inflation:
- 2018 1.9% vs 2.0% prior
- 2019 2.0 vs 2.1% prior
- 2020 2.0% vs 2.1% prio
When the dust settles, however, the markets may price in a more hawkish than expected outcome from today’s conclusion of the two-day meeting at the FOMC which could ultimately weigh on risk appetite and US stocks, fulling demand for the safe haven metal, limiting its downside potential. It now depends on how Powell discusses the future in today’s presser.
Gold levels
The 21-D SMA is located at 1234 and a break there will open risk to 1211 late Nov lows just below the 100-D SMA at 1213 ahead of the 1210 round number. On the upside, the 50% Fibo level at 1262 is a key target where there is a confluence of the 200-D SMA found nearby at 1254. However, the technical indicators remain bearish and the daily outlook is a touch less positive on today’s FOMC outcome, while weekly outlook stays bullish.
- Support levels: 1246 1242 1241
- Resistance levels: 1251 1253 1257
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