Gold Price Prepares to Breakout as FOMC Rate Decision Nears
FOMC Rate Decision and Gold (XAU) Price, Analysis and Chart
- Gold remains constrained but a breakout looms.
- FOMC will begin cutting interest rates next Wednesday.
Q3 2019 Gold Forecast and Top Trading Opportunities
Gold Stuck in a Technical Pattern Ahead of the Fed
Gold remains in a narrowing triangular pattern and any breakout will likely wait for next Wednesday’s FOMC rate decision where the Fed will embark on a series of interest rate cuts to help boost the economy. A 0.25% rate cut is fully priced-in while expectations of a 0.50% have drifted lower recently to around 17%. While the interest rate cut is priced-in, the post-decision Fed language will be parsed closely to see if the central bank gives any clues to the path of future rate cuts. Next Friday also sees the latest US labor report, another important US dollar shifting event.
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The daily gold chart shows how the price of gold has been constrained this week in a triangular formation and points to a breakout on the horizon. The precious metal has respected the upper and lower trend lines this week and today’s price action is muted with gold trading in a narrow $5/oz. range. All three moving averages remain supportive, while the CCI indicator shows that gold has moved out of overbought territory and is nearing its lowest level in nearly two-months. Gold needs to break and close either below or above trend to define the next move. Support remains at $1,400/oz. while to the upside $1433/oz. ahead of $1,439/oz. and then a fresh re-test of the $1,453/oz. six-year high.
Gold Price Daily Chart (January – July 26, 2019)
IG Client Sentiment data show that 72.3% of retail traders are net-long of gold, a bearish contrarian indicator. However, recent daily and weekly positional changes give us a stronger bearish contrarian bias.
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