Gold Price Talking Points
Gold pulls back from a fresh weekly high ($1311) following the Federal Open Market Committee (FOMC) Minutes, and the recent advance in the price for bullion appears to have stalled ahead of weekend as it snaps the series of higher highs and lows from earlier this week.
Gold Price Rebound from April-Low Stalls Following FOMC Minutes
Gold struggles to retain the rebound from the monthly-low ($1281) as the FOMC Minutes suggest the central bank has yet to abandon the hiking-cycle, and the committee may continue to endorse a wait-and-see approach at the next interest rate decision on May 1 as ‘participants generally agreed that a patient approach to determining future adjustments to the target range for the federal funds rate remained appropriate.’
It seems as though Fed officials are no in rush to further adjust the forward-guidance for monetary policy as the central bank plans to wind down the $50B/month in quantitative tightening (QT) by the end of September, and Chairman Jerome Powell & Co. may continue to project a longer-run interest rate of 2.50% to 2.75% as ‘some participants indicated that if the economy evolved as they currently expected, with economic growth above its longer-run trend rate, they would likely judge it appropriate to raise the target range for the federal funds rate modestly later this year.’
It remains to be seen if Fed officials will make additional changes to the Summary of Economic Projections (SEP) as ‘a majority of participants expected that the evolution of the economic outlook and risks to the outlook would likely warrant leaving the target range unchanged for the remainder of the year,’ and the central bank may continue to endorse a ‘patient’ approach over the coming months as ‘participants continued to view a sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective as the most likely outcomes over the next few years.’
However, market participants appear to be unconvinced, with Fed Fund Futures still highlighting bets for a rate-cut in December, and the inversion in the U.S. Treasury yield curve may fuel concerns of a policy error as it warns of a looming recession. In turn, gold may continue to benefit from the current environment as market participants look for an alternative to fiat-currencies, but recent price action instills a mixed outlook for the precious metal as it snaps the series of higher highs and lows from earlier this week.
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Gold Price Daily Chart
- Keep in mind, the broader outlook for gold remains mired by the threat of a head-and-shoulders formation, with the Relative Strength Index (RSI) highlighting a similar dynamic as it continues to track the bearish trend from earlier this year.
- Nevertheless, the opening range for April instills a constructive view for gold amid the lack of momentum to test the 2019-low ($1277), with the $1279 (38.2% retracement) area still offering support.
- However, lack of momentum to push back above the Fibonacci overlap around $1315 (23.6% retracement) to $1316 (38.2% expansion) raises the risk for range-bound prices.
- Need a break above the overlap to bring the $1328 (50% expansion) to $1329 (50% expansion) region on the radar, which sits just above the March-high ($1324).
For more in-depth analysis, check out the 2Q 2019 Forecast for Gold
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--- Written by David Song, Currency Strategist
Follow me on Twitter at @DavidJSong.