Gold Break Out Imminent on FOMC Rate Decision- $1355 Key Support
Fundamental Forecast for Gold: Neutral
- Gold is Too Quiet…Expect Something Soon
- Crude Oil, Gold Look to US Retail Sales Data for Fed Policy Clues
- Gold Low of Day Registered Just Below Key Level
Gold crept higher this week with the precious metal posting a modest advance of just 0.36% to trade at $1387 at the close of trade in New York on Friday. Bullion price action has remained rather subdued despite the wide spread volatility seen in FX and broader equity markets with prices continuing to hold steadily below the $1400-threshold. All eyes now turn to key event risk next week as prices continue to coil into a clearly defined range.
Looking ahead to next week investor focus remains fixated on the FOMC policy decision on Wednesday. This time around we get the updated quarterly projections from the committee on inflation, growth, and the interest rate. For weeks the markets have been roiled by the notion that the Fed may begin to taper its QE operations during the summer and market participants will be lending a keen ear to Bernanke’s subsequent press conference for further clarity on where the committee stands. Regardless, the event may be just the catalyst needed to get the gold trade back on track with a break of a multi-month consolidation pattern likely to offer further clarity on gold’s current positioning.
From a technical standpoint gold has continued to trade into the apex of a wedge formation dating back to the April lows with a break next week likely to offer further conviction on a near-term directional bias. A break below interim support at $1356 opens up targets at $1340, $1331 and $1307 while a breach above the monthly high at $1423 eyes a key resistance range between $1430- $1440. Only a break above this mark invalidates our broader directional bias with such a scenario eyeing subsequent targets at the 100% extension taken off the May lows at $1451 and t$1470. –MB