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Gold Price Under Pressure Ahead of Decision on US Interest Rates

Gold Price Under Pressure Ahead of Decision on US Interest Rates

Martin Essex, MSTA, Analyst

Gold price chart and analysis:

  • The four-month downtrend in the gold price looks set to continue despite its recent stability.
  • Two hikes in US interest rates are expected this year – another reason for traders to shun it.

Our trading forecasts for Q3 have been published; you can find the gold guide here.

Gold price chart bearish

The price of gold remains in a four-month downward-sloping channel on the daily chart, despite having steadied over the past two weeks, and could lose more ground if the US Federal Reserve strikes a hawkish tone today and reinforces predictions of an increase in US interest rates in September.

Expectations of a second rate rise later this year are adding to the attractions of the USD compared with zero-yielding gold, and a stronger Dollar would likely mean a weaker gold price given the strong inverse price relationship between the currency and the precious metal.

Gold Price Chart, Daily Timeframe (April 1 – August 1, 2018)

Latest gold price chart.

Chart by IG

As the chart above shows, the gold price has traded sideways since its fall on July 17 and a break through the July 19 low at $1,211.52 would bring the $1,200 level into focus, with trendline support just below there at around $1,195. On the flipside, a break above the July 26 high at $1,235.31 on a dovish Fed would dispel some of the current negativity.

Note too that net-long positions by large speculators have fallen towards zero and, at nearly 49,000 contracts, net-long positioningis now at its lowest in more than a year. Large speculators have not been net-short since 2002.

More to read on gold:

How to trade gold: top gold trading strategies and tips

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--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

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

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