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Gold Price Analysis and Talking Points:

  • Gold Prices in Pole Position to Gain from Global Central Bank Easing
  • FOMC to Signal Readiness to Act

See our quarterly gold forecast to learn what will drive prices throughout Q2!

Gold Prices in Pole Position to Gain from Global Central Bank Easing

Yesterday’s dovish stance from ECB’s Draghi in which he opened up the door for further stimulus provided yet another reminder that global central bank easing is returning, which in turn places gold in pole position to benefit.

FOMC to Signal Readiness to Act

Today will see the latest decision from the FOMC monetary policy meeting whereby focus will be on whether the central bank signals a readiness to ease policy, particularly given the sizeable fall in inflation expectations, which suggests that financial conditions are perhaps too tight. In regard to the drop-in inflation expectations, this has arguably backed Fed Chair Powell into a corner and will have to be addressed, given that the Chair himself had previously stated that “inflation expectations is the most important driver of actual inflation”. As such, the Federal Reserve are likely to drop the reference that they will remain “patient” and instead note that they will act as appropriate in order to sustain the expansion.

Fed Meeting to Dictate Near-Term Gold Direction, Upside Risks in Longer Run

As mentioned previously (full story), the longer run risks to gold prices remain tilted to the upside with a move towards $1400 on the cards provided we see a reversal in Fed policy. The near-term direction is a little less certain given the aggressive pricing of Fed easing (61bps worth of easing priced in by year end), which sets a high bar for the Federal Reserve to match the dovish expectations. In turn, the raises the risk of potential disappointment, which could see a modest pullback in gold prices as the USD finds support. However, a strong signal from the Fed that they could cut interest rates as soon as July could be enough to see the precious metal to make a firm break above $1350-60. So far, gold prices have failed to consolidate above $1350, thus a dovish Fed may be key in sparking a breakout.

Fed Commentary

Gold Price Outlook Bullish Longer Term, Focus on Fed Meeting

Source: Federal Reserve Commentary

GOLD Technical Levels

Resistance 1: Descending Trendline ($1360)

Resistance 2: 2018 Peak ($1366)

Resistance 3: 2016 Peak ($1375)

GOLD PRICE CHART: Weekly Time-Frame (Feb 2016-Jun 2019)

Gold Price Outlook Bullish Longer Term, Focus on Fed Meeting

What You Need to Know About the Gold Market

GOLD TRADING RESOURCES:

--- Written by Justin McQueen, Market Analyst

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

Follow Justin on Twitter @JMcQueenFX