We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Mixed
GBP/USD
Mixed
USD/JPY
Bearish
Gold
Bearish
Oil - US Crude
Mixed
Bitcoin
Mixed
More View more
Real Time News
  • Commodities Update: As of 19:00, these are your best and worst performers based on the London trading schedule: Gold: 0.56% Silver: 0.39% Oil - US Crude: 0.12% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/nGk6siLuAj
  • #Gold prices have responded to key support with the recent recovery now targeting the first resistance target at 1472- look for a reaction here. Get your $XAUUSD technical analysis from @MBForex here: https://t.co/DOaEk7zMub https://t.co/psZR1kviqk
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 97.57%, while traders in France 40 are at opposite extremes with 84.14%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/MicO4pBhXR
  • Banxico: - Core inflation running persistently high $MXN
  • $USDJPY drops as Financial Times reports that China continues to delay truce with US in struggle to close phase-one trade deal https://t.co/Nm2LnUSyRx
  • Indices Update: As of 19:00, these are your best and worst performers based on the London trading schedule: France 40: 0.01% Germany 30: -0.10% US 500: -0.14% Wall Street: -0.20% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/MLZRHQnmWc
  • Fed's Bullard: - Review of policy is evolution, not revolution $DXY $SPX
  • RT @Scutty: Global Debt Surges Above $250 Trillion as U.S., China Lead Way https://t.co/Lgr5sUSGQx
  • RT @LiveSquawk: Fed's Bullard: Fed Can Reconsider Whether To "Take Back" Recent Insurance Cuts If And When Businesses Adjust To New Trade L…
  • Fed's Bullard: - Baseline case for 2% growth is holding $SPX $DXY
Gold Price Outlook: Bull Flag Emerges amid Failure to Test Monthly-Low

Gold Price Outlook: Bull Flag Emerges amid Failure to Test Monthly-Low

2019-10-23 01:00:00
David Song, Currency Strategist
Share:

Gold Price Talking Points

The price of gold trades in a narrow range amid growing bets for a Federal Reserve rate cut, and failure to test the monthly-low ($1459) may bring the topside targets back on the radar as a bull-flag formation takes shape.

Gold Forecast: Bull Flag Takes Shape amid Failure to Test Monthly-Low

Gold prices may continue to consolidate as the US-China trade war appears to be coming to an end, and it seems as though more details will be announced ahead of the Asia-Pacific Economic Cooperation (APEC) meetingscheduled for November 15-16 as President Donald Trump insists that “the phase one deal can be finalized & signed soon.”

It remains to be seen if the trade truce will lead to an agreement as China vows to retaliate to the US blacklist, with Foreign Ministry Spokesperson Hua Chunying pledging to “make an official announcement” as to whether President Xi Jinping will attend the APEC meeting in Chile.

Image of Fed Fund futures

With that said, the Federal Reserve may attempt to buy time after delivering back-to-back rate cuts, but Fed Fund futures show growing speculation for another 25bp reduction on October 30, with the gauge now reflecting a greater than 90% probability for the benchmark interest rate to narrow to 1.50% to 1.75%.

The growing dissent within the Federal Open Market Committee (FOMC) may fuel fears of a policy error as the central bank makes an unexpected announcement to purchase US Treasury Bills in the secondary market, and recent data prints coming out of the US economy may push Chairman Jerome Powell and Co. to further embark on the rate easing cycle amid signs of slowing consumption.

The FOMC may continue to insulate the US economy as private-sector spending “has been the key driver of growth,” and the central bank may have little choice but to reverse the four rate hikes from 2018 as “weakness in global growth and trade policy uncertainty haveweighed on the economy and pose ongoing risks.”

In turn, falling interest rates along with fears of a global recession may heighten the appeal of gold, and market participants may look to hedge against fiat currencies as the International Monetary Fund (IMF) continues to cut its global growth forecast.

Keep in mind, the near-term outlook for gold remains mired by a head-and-shoulders formation, with the precious metal still at risk for a larger correction as the Relative Strength Index (RSI) continues to track the bearish formation from June.

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 price daily chart

Source: Trading View

  • The broader outlook for gold prices remain constructive as both price and the Relative Strength Index (RSI) clear the bearish trends from earlier this year, with the precious metal trading to a fresh yearly-high ($1557) in September.
  • However, recent developments in the RSI warns of a near-term correction in gold as the oscillator continues to track the downward trend from June, with recent price action raising the risk for a head-and-shoulders top.
  • The string of failed attempts to close above the Fibonacci overlap around $1509 (61.8% retracement) to $1517 (78.6% expansion) keeps the downside targets on the radar, with a move below $1468 (50% expansion) opening up the overlap around $1447 (38.2% expansion) to $1457 (100% expansion).
  • However, lack of momentum to test the monthly-low ($1459) may continue to generate range-bound conditions, and a bull-flag formation may evolve over the coming days as the broader outlook for gold remains constructive.
  • Need the RSI to break out of the bearish formation to bring the topside targets back on the radar, with a break/close above the Fibonacci overlap around $1509 (61.8% retracement) to $1517 (78.6% expansion) opening up the $1554 (100% expansion) region, which largely lines up with the 2019-high ($1557).

For more in-depth analysis, check out the 4Q 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.

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

DISCLOSURES

News & Analysis at your fingertips.