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GOLD PRICE TALKING POINTS

Gold prices may exhibit a more bearish behavior over the coming months as the Federal Open Market Committee (FOMC) ‘expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate,’ but fresh comments from the 2018-voting members may generate a larger rebound in the precious metal should a growing number of central bank officials strike a less hawkish outlook for monetary policy.

Image of daily change for major currency rates

GOLD PRICE FORECAST: LESS HAWKISH FOMC TO FUEL LARGE REBOUND

Image of daily change for gold prices

Failure to preserve the range from earlier this year has altered the broader outlook for gold prices, with the precious metal now at risk of giving back the advance from the December-low ($1236) as the FOMC is widely expected to raise the benchmark interest rate to a fresh threshold of 1.75% to 2.00% in June.

Recent comments from Atlanta Fed President Raphael Bostic suggests the FOMC will continue to normalize policy in the second-half of the year as the committee ‘is close to mandate-consistent outcomes for both inflation and employment,’ but it seems as though the 2018-voting member sees limited scope to extend the hiking-cycle as the official anticipates ‘two more’ rate-hikes in 2018.

With that said, market participants may look beyond the FOMC Minute as New York Fed President William Dudley and Chairman Jerome Powell are on tap to speak later this week, and the comments may ultimately boost the appeal of gold should the officials tame expectations for a more aggressive approach in normalizing monetary policy.

GOLD DAILY CHART

Image of gold daily chart
  • Gold remains vulnerable to further losses as both price and the Relative Strength Index (RSI) preserve the bearish formations from earlier this year, with the next downside hurdle coming in around $1271 (38.2% expansion) to $1279 (38.2% retracement).
  • However, the failed attempts to close below the $1288 (23.6% expansion) to $1291 (50% expansion) region raises the risk for a larger rebound especially as the momentum indicator fails to push into oversold territory.
  • Need a break/close above the $1298 (23.6% retracement) to $1302 (50% retracement) zone to look for a more meaningful recovery, with the next area of interest coming in around $1312 (61.8% expansion) to $1315 (23.6% retracement).

For more in-depth analysis, check out theQ2 Forecast for Gold

Interested in having a broader discussion on current market themes? Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups!

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Additional Trading Resources

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Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2018.

--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.