Gold Prices, News and Analysis
- Gold’s rally finds stiff resistance between $1,208/oz. and $1,215/oz.
- Friday’s non-farm payroll number could send the precious metal lower.
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Gold Now Likely to Fall Back to $1,180/oz.
The precious metal’s recent pull-back has found short-term resistance around $1,208/oz. and may struggle to breach this level in the short-term after Federal Reserve chairman Jerome Powell said that the outlook for the US economy was remarkably positive, hinting that interest rates may have to move higher than current market expectations. With a December 0.25% US interest rate hike already baked into the market, the March meeting now comes into play for another rise. The Fed had been expected to raise rates three times in 2019, but expectations are now leaning towards four hikes, underpinning ongoing US dollar strength.
US dollar strength will continue to weigh on the non-interest-bearing gold as short-term US government bonds yields rise, making them more attractive for investors. In addition, the strong correlation between gold and the Chinese Yuan continues with a weaker Chinese currency weighing on the precious metal. The latest weakness in the Chinese Yuan to USDCNY 6.870 has not yet dragged gold lower and may flow through into the price shortly.
Gold – Chinese Yuan Correlation - Daily Chart
Gold has made a couple of attempts to break back above $1,208/oz. in the last couple of days and found sellers at this level. In addition, the 20-day and 50-day moving average are currently in play and gold would need to break above these two momentum indicators to start to negate the prevailing short-term bearish sentiment and the longer-term downtrend. There is also very little price action below $1,180/oz. before the 22-month low at $1,160/oz. – made on August 16 – comes into play, a potential target for short-term bears.
Gold Daily Price Chart - October 4, 2018
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--- Written by Nick Cawley, Analyst