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Gold Price Analysis and Talking Points:

  • Gold Bulls to Cheer Deteriorating Economic Outlook
  • Fed Error Sparks U-Turn

See our quarterly gold forecast to learn what will drive prices through mid-year!

Gold Bulls to Cheer Deteriorating Economic Outlook

Consolidation has been the trade for Gold since the beginning of the year, with prices continuing to oscillate between $1280 and $1295. However, as the fundamental outlook deteriorates, given the lagging impact of interest rate hikes tightening liquidity, alongside the fading effects of fiscal stimulus, a bullish breakout in Gold could be on the horizon in the near term. Particularly as Gold has come back in favour in times of risk off over the Dollar, with the US beginning to show signs of a slowdown (most recent ISM Mfg. PMI, forward looking new orders, confirming this).

Fed Error Sparks U-Turn

At the back end of 2018, Fed Chair Powell’s policy error, whereby he stated that the Fed are a “long way” from neutral on interest rates, which so happened to be the point where equity markets peaked, saw gold prices rise over 8% throughout Q4. Since then, it has been made apparent that stock market fluctuations are now guiding Federal Reserve policy with the majority of rate setters now using “patience” as their preferred dovish buzzword, in order to ease volatility. Consequently, Fed Fund futures are currently signaling that the Fed’s tightening cycle has come to an end (albeit, maybe too dovish) with bond yields also pulling back, which in turn paves the way for further upside in Gold.

Gold Technical Outlook

On the technical front, Gold prices are at a pivotal point, whereby the descending trendline from the record high is currently curbing a move to the upside, which also coincides with the psychological $1300/oz level. As such, a fundamental imputes in the form of continued deteriorating economic data from the likes of US and China to further exacerbate concerns of a global growth slowdown could be enough to provide bullish breakout. Provided that there is a closing break above the key $1300/oz, this could open up a move towards $1360.

Alongside this, Gold bulls will cheer the fact that the precious metal has now formed a golden cross (50DMA rises above 200DMA), which typically signals a bullish outlook on the technical front.

What You Need to Know About the Gold Market

GOLD PRICE CHART: Daily Time-Frame (Sep 2017-Jan 2019)

Gold Price Analysis: Bullish Breakout on Horizon Amid Golden Cross

Chart by IG

RECOMMENDED GOLD TRADING RESOURCES:

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX