Gold Is Way Too Much Affected By the USD

In late summer, Gold is consolidating. On August 28th, the Troy ounce of this precious metal is trading at 1215.80. It’s quite far from the August low at 1167.10, but still not enough to say that the risks of new sales have gone. Over the last week, Gold has added 4% and may continue moving upwards.

The basic risk for Gold is upcoming rate hikes by the US Federal Reserve. This factor supports the USD and, as a result, makes Gold weaker. Current market expectations on the rate increase during the regulator’s September meeting are 90%, the December meeting – about 60%. If the Fed rejected the idea of four hikes this year in favor of three as it was expected earlier, Gold would get stronger much faster.

Among fundamental news, which is positive to Gold, one should pay attention to the increased demand for the precious metal in India: in the second quarter 2018, the country’s jewelry industry bought 4 times more Gold than before. At the same time, one should admit that right now there aren’t enough fundamental indicators that may influence Gold behavior, such as demand, mining, or reserves, but too many speculations instead, which means that the USD price movement is still the major factor for Gold at the moment. The high volatility of the USD, in its turn, makes Gold more active asset than it was before.

The H4 chart shows an upward movement. By now, the pair has already got close to the resistance line of the upside projected channel. The main upside target is at 1216.50. This level may provide resistance to the uptrend and force a new pullback towards the support line at 1200.00. Assuming that the uptrend may continue after a short-term correction, the instrument may be rebound from the support line and break the resistance one, thus moving into the next projected channel. The closest upside target, in this case, will be at 1235.00.

This article was written by Dmitriy Gurkovskiy, a Chief Analyst at RoboForex