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Talking Points:

- Gold prices continue to trade within a bearish channel after a failed attempt to take out the 2018 high in mid-February. Prices have since settled down to find a few days of support at the 2015 high around $1,307.59; but with a highly-anticipated FOMC rate decision waiting in the wings for tomorrow, Gold prices are prone to volatility.

- While tomorrow’s rate decision is carrying a strong probability of a hike, market participants will likely be looking ahead to gauge the Fed’s tolerance towards the potential for four full hikes this year. This will likely bring upon some element of vulnerability in Gold prices, and if the US Dollar can establish a spate of strength long enough to test towards the 91.00 level on DXY, a deeper retracement will likely show through in Gold, which could start to open the door to longer-term bullish setups in the Yellow Metal.

- Are you looking to improve your trading approach? Check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

Do you want to see how retail traders are currently positioned around Gold? Click here for IG Client Sentiment.

Gold: Long-Term Resistance, Short-Term Support Ahead of FOMC

Tomorrow brings the Federal Reserve’s March rate decision, and markets are assuming a strong probability of getting a hike at tomorrow’s meeting with odds currently reflecting a 94.4% chance for 25 basis points of tightening. But this has been long known as the FOMC has been fairly clear with their intentions to further normalize policy. The bigger question, however, is what’s on the bank’s slate for the rest of the year. A total of three hikes (including tomorrow’s) has long been the central expectation, but after Mr. Powell’s testimony in-front of Congress earlier this month, the idea of four hikes started to more prominently enter the equation; and as we sit 24 hours ahead of tomorrow’s expected rate hike, those odds for four hikes in 2018 are sitting at 38.3%.

This is relevant for Gold prices as a longer-term trend has started to come into question after running into a big batch of resistance. The price of $1,357.50 marked last year’s high in Gold, and the year before that saw a high print of $1,375.15. We tested that zone just a few weeks into the New Year and then again a couple of weeks after that; but, to date, bulls have been unable to make much ground.

Gold Price Chart, Weekly Time Frame: Short-Term Bearish Channel Within Longer-Term Bullish Channel

gold price chart weekly time frame

Chart prepared by James Stanley

Gold's 2015 High is Helping to Set Support

Price action in Gold has had a bearish tonality since that second failed test at resistance in mid-February. This has helped the bearish channel to form; but it hasn’t quite been all doom-and-gloom, as we’ve seen a tendency for buyers to show up around the 2015 high of $1,307.59; making for an interesting if not indecisive backdrop as we approach tomorrow’s FOMC rate decision.

Gold Price Chart: Four-Hour Time-Frame, 2015 High as 2018 Support

gold price chart four hour time frame

Chart prepared by James Stanley

The Short-Term View on Gold Prices

The shorter-term view on Gold is going to be a bit messier as we’ve been sloshing around within predefined support and resistance for the past few weeks. On a shorter-term basis, the bearish channel appears to be part of a bull flag formation, with prices scaling under the 38.2% retracement of the prior bullish move that began in mid-December. This would put emphasis on the price of $1,301.36, and if buyers cannot hold support above that level, the door opens for a deeper down-side move towards $1,286 and then $1,275.

Gold Price Chart: Eight-Hour Time-Frame, Break of 50% Fib Opens Door for 61.8% Test

gold price chart eight hour time frame

Chart prepared by James Stanley

On the long side of short-term price action in Gold, traders looking to buy support in anticipation of another move-higher may want to wait for a break of this bearish trend-line that’s showed up over the past couple of weeks. That bearish trend-line currently projects to the $1,320-area on the chart, and a bullish break above this level would also give us a fresh swing-high to work with, which would be further encouragement to the prospect of bullish continuation.

Gold Price Chart: Hourly Time-Frame

gold price chart hourly time frame

Chart prepared by James Stanley

The Longer-Term View on Gold Prices

This is a bit more comfortable than the above as there isn’t really much to do just yet. A bullish break of the short-term trend-line looked at above can start to open the door for longer-term topside strategies. Even this may be a bit unsavory for longer-term views, as a bullish breakout of that short-term trend would then have to contend with the lower-highs that have shown thus far in 2018.

More proactively, traders can look for support in the longer-term bullish trend before establishing bullish exposure. The zone from $1,275 to $1,278.76 could be particularly attractive for such a scenario, as this is the 61.8% retracement of the July-December, 2016 sell-off; which starts to coincide with the trend-line projection of the bullish channel at some point around mid-April.

Gold Price Chart: Daily Time Frame, Confluent Support Potential $1275-$1,279

gold price chart daily time frame

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on Gold prices? Our DailyFX Forecasts for Q1 have a section specifically for Gold. We also offer a plethora of resources on our Gold page, and traders can stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers a plethora of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

--- Written by James Stanley, Strategist for DailyFX.com

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