Gold’s price jumped in today’s Asian session, interrupting its downward motion over the past week, leaving traders puzzled about its direction. On a fundamental level we note the following:
- The rise of gold’s price may have been fueled also by the weakening of the USD and in general we do see the negative correlation of the two trading instruments being in effect over the past few days and as these lines are written. If actually so, expect a possible strengthening of the USD to weaken gold’s price and vice versa.
- On Wednesday we highlight the release of the Fed’s interest rate decision as a key issue for gold traders. The bank is expected to remain on hold and should it use a hawkish tone, in the accompanying statement and Fed Chairman Powell’s press conference we may see gold’s price weakening. Also any sign that the bank points towards a slower rate cutting path than what the market is expecting, could weigh on gold’s price and vice versa.
- There is still some uncertainty about US President Trump’s trade wars as the whole issue is still evolving. On latest news, the US President signaled his willingness to strike a deal with China, which was a positive step, yet there seems to be considerable difficulty in going forward with negotiations. Any further easing of market worries could weigh on gold’s price, while any escalation could support it.
- Furthermore, we also note that US President Trump seems to have stated that his is not trying to remove Fed Chairman Powell, but that he wants lower rates. The statement may have eased market worries for the independence of the Fed and any further signs to that direction could weigh on gold’s price.
- Last but not least we note the tensions between Pakistan and India yet for the time being we do not consider it as a key issue for gold’s price. Yet a possible escalation could create safe haven inflows for the yellow metal.
Technical analysis
Technically we note the rise of gold’s price after bouncing on the 3200 (S1) support line last Thursday. For the time being we tend to maintain a bias for a sideways motion of the precious metals’ price between the 3200 (S1) support line and the 3350 (R1) resistance line. Yet there seem to be some bullish tendencies, which become more obvious once one notices how the RSI indicator bounced on the reading of 50, while the price action of gold bounced on the 20 MA, which is the median of the Bollinger bands and still maintains its upward direction. Should the bulls actually be in charge of gold’s direction, we may see the precious metal’s price breaking the 3350 (R1) resistance line and start aiming for the 3500 (R2) resistance level, which is also a record high level for the shiny metal.
A bearish outlook is currently remote for the time being and for its adoption we would require gold’s price to drop, break the 3200 (S1) support line and continue to also break the 3057 (S2) support level, with the next possible target for the bears being set, not so far below, at the 2955 (S3) support barrier.
- Support: 3200 (S1), 3057 (S2), 2955 (S3)
- Resistance: 3350 (R1), 3500 (R2), 3650 (R3)
