Never miss a story from David Song

Subscribe to receive daily updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to David Song

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

Gold Price Talking Points

Gold prices appear to be stuck in a holding pattern as US Treasury Secretary Steven Mnuchin intends to hold a call with Chinese officials this week, but current market conditions may keep the precious metal afloat as the Federal Open Market Committee (FOMC) is widely expected to shift gears later this month.

Gold Prices Stuck in Holding Pattern as US and China Hold Trade Talks

The price of gold continues to give back the advance from the monthly-low ($1382) as the US Retail Sales report beats market expectations, with private-sector spending expanding 0.4% in June versus expectations for a 0.2% rise.

Developments coming out of the US may continue to drag on bullion as President Donald Trump tweets “China wants to make a deal,” but the looming change in monetary policy may have a greater impact in dictating gold prices as the Federal Reserve appears to be on track to insulate the economy from the shift in trade policy.

Fed Chairman Jerome Powell continued to endorse a dovish forward guidance in a recent speech, with the central bank head stating that “many FOMC participants judged at the time of our most recent meeting in June that the combination of these factors strengthens the case for a somewhat more accommodative stance of policy.

Image of Fed Fund futures

The comments reinforce expectations for an imminent change in monetary policy as Fed Fund futures highlight a 100% probability for at least a 25bp rate cut on July 31, and the central bank may continue to change its tune over the coming months as the US and China struggle to reach a trade deal.

However, it remains to be seen if the FOMC will establish a rate easing cycle as the US economy shows little signs of a recession, and the committee may revert back to a wait-and-see approach after delivering an “insurance cut” as Chairman Powell and Co. “expect growth in the United States to remain solid, labor markets to stay strong, and inflation to move back up and run near 2 percent.

With that said, gold prices may continue to benefit from the current environment amid the threat of a policy error, and the price of bullion may exhibit a more bullish behavior over the remainder of the year as market participants look for an alternative to fiat currencies.

Sign up and join DailyFX Currency Strategist David Song LIVE for an opportunity to discuss potential trade setups.

Gold Price Daily Chart

Image of gold daily chart
  • The broader outlook for gold is no longer mired by a head-and-shoulders formation as both price and the Relative Strength Index (RSI) break out of the bearish trends from earlier this year.
  • Moreover, the recent pullback in bullion appears to have run its course as the Fibonacci overlap around $1380 (100% expansion) to $1385 (78.6% expansion) offers support, but the price of gold appear to be stuck in a wedge/triangle formation as it fails to extend the series of higher highs and lows from the previous week.
  • Will keep a close eye on the monthly opening range as the RSI falls back towards trendline support, with a break/close below $1402 (78.6% expansion) raising the risk for a move towards the July-low ($1382).
  • Need a break/close above the Fibonacci overlap around $1418 (100% expansion) to $1422 (23.6% expansion) to bring the topside targets back on the radar, with the first area of interest coming in around $1444 (161.8% expansion) to $1448 (382.% retracement).

For more in-depth analysis, check out the 3Q 2019 Forecast for Gold

Additional Trading Resources

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2019.

--- Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong.