Gold Price Under Pressure Ahead of Decision on US Interest Rates
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)
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:
Resources to help you trade the forex markets
Whether you are a new or an experienced trader, at DailyFX we have many resources to help you: analytical and educational webinars hosted several times per day, trading guides to help you improve your trading performance, and one specifically for those who are new to forex. You can learn how to trade like an expert by reading our guide to the Traits of Successful Traders.
--- Written by Martin Essex, Analyst and Editor
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.