Gold Talking Points
- Gold has gently moved higher but needs a boost to break upcoming technical resistance.
- New US Fed Chair Powell appears before Congress – how will USD react?
Gold Price Stuck in a Range for Now
The price of gold has nudged higher in the past week, aided by technical support – Fibonacci 38.2% retracement - around $1316/oz. The price now is capped by technical resistance – Fibonacci 23.6% retracement – at $1335/oz. and is unlikely to make break higher until the short-term direction of the US dollar is known. Traders may not have long to wait as US Federal Reserve chairman Jerome Powell makes his inaugural speech to Congress later today with traders looking for more clarity from the new Fed Chair over US monetary policy.
Markets are currently pricing in three 0.25% interest rate hikes in the US in 2018 with the first rise – to 1.75% - priced in for the next policy meeting on March 21. US 2-yr bond yields remain just a couple of basis points off their recent 2.27% high while US 10-year bond yields are around 10bps off their recent 2.96% high, both underpinning the expectations of three hikes this year.
The US Dollar Will Direct Gold in the Near-Term
The worry for the precious metal is that Fed Chair Powell may take a slightly more hawkish stance and say that a combination of the recently announced fiscal stimulus – US President Trump’s tax cuts – and the country’s near-full employment may increase domestic price pressure, leaving a fourth rate hike potentially on the table in 2018.
The gold chart below shows little in the way of direction with the stochastic indicator mid-market, albeit pointing higher – while the spot gold price is stuck between the 20- and 50-day EMAs. As noted before the gold price is at the top of the $1316/oz. - $1335/oz. Fibonacci range and would need a mildly dovish first testimony from the Fed’s Powell to break to the upside.
Gold Price Chart Daily Timeframe (October 23, 2017 – February 27, 2018)
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--- Written by Nick Cawley, Analyst
To contact Nick, email him at nicholas.cawley@ig.com
Follow Nick on Twitter @nickcawley1
