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Gold Price Outlook: Gold Grasps for Support Ahead of ECB, FOMC

Gold Price Outlook: Gold Grasps for Support Ahead of ECB, FOMC

James Stanley, Senior Strategist

Gold Price Outlook Talking Points:

Gold Grasps at Support, Remains Long-Term Overbought

The next couple of weeks bring two highly-awaited Central Bank rate decisions out of Europe and then the US. Both meetings are expected to produce some form of softening and, at this point, there’s likely a portion of that already priced-in to the Euro and the US Dollar. But what else is on the cards for Q4 of this year, that’s what market participants will be looking for around each respective rate decision.

Given the current backdrop, where pretty much all large Central Banks are either in some form of dovish policy or at the very least investigating such, and the setup around Gold remains very interesting. Gold prices have been trending-higher for about a year now, setting a low mid-August of 2018 and continuing to gain ever since. That bullish run hastened in Q4 of last year as expectations around the Fed started to soften, with another major push showing around the June open just as Jerome Powell talked up the prospect of dovish policy.

Eventually, this produced a deep overbought reading with RSI on the weekly chart moving to its highest since 2011, right around the time that the post-GFC run in Gold started to top-out above the 1900 level. Since then, the bullish run has stalled at a key area of resistance, taken from Fibonacci levels at 1509-1527.

Gold Price Weekly Chart

gold price weekly price chart

Chart prepared by James Stanley; Gold on Tradingview

On a shorter-term basis, bulls haven’t yet relented despite the continued overbought readings on longer-term charts. As looked at last Thursday, the 1550 level has become a tough area for spot Gold as prices have now posed three different resistance inflections upon tests above this level. This has led to a pullback to the 1509 Fibonacci level mentioned in that piece which has since helped to hold the lows, with an assist from a trend-line projection connecting June highs and August lows.

Gold Eight-Hour Price Chart

gold price eight hour chart

Chart prepared by James Stanley; Gold on Tradingview

Gold Price Strategy Moving Forward

Given the aggressive bullish theme that’s shown in Gold over the past year and, more importantly, the past few months as expectations have grown for even softer approaches out of global Central Banks, and the topside of Gold can remain as attractive. The bigger question is how aggressively one wants to approach that theme, particularly considering the longer-term overbought nature of the move.

For very aggressive approaches, the same 1509 level looked at previously that continues to help hold the lows can be usable with stops investigated below the Friday swing-low. Underneath this, another area of interest exists around the 1493 level, and, below that, another area of support potential in the 1475-1480 zone.

Gold Price Four-Hour Chart

gold price four hour chart

Chart prepared by James Stanley; Gold on Tradingview

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts have a section for each major currency, and we also offer a plethora of resources on Gold or USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers an abundance of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

--- Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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