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David Becker
Gold daily chart, March 20, 2019

Gold prices surged higher on Wednesday breaking out as the Fed was more dovish than expected. The Federal Reserve kept interest rates unchanged. The central bank also downgraded GDP for the balance of 2019 and 2020. They see unemployment moving slightly higher. The Fed also changed its dot plots which are the future forecast of prices.  Lastly the Fed said that they would soon end their balance sheet runoff. The dollar tumbled in the wake of the Fed dovish commentary, which weighed on US yields and paved the way for higher gold prices.

Technical Analysis

Gold prices surged higher breaking out and poised to test a downward sloping trend line that comes in near 1,345. Support on the yellow metal is seen near the 50-day moving average at 1,304. Additional support is seen near the 10-day moving average at 1,300. Medium term momentum has turned positive as the MACD (moving average convergence divergence) index recently generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in the black with an upward sloping trajectory which points to higher prices. The fast stochastic is surging higher. This reflects accelerating positive momentum. The current reading of 64 is still in the middle of the neutral range which means momentum can still climb.


The Fed Was More Dovish Than Expected

The Fed decision to keep rates unchanged and substantially reduced its dot plot. The fed now sees no rate hikes in 2019.  The runoff to the balance sheet which has been a form of quantitative tightening will begin to unwind in May and completely be finished by September.

UK Inflation Was Strong

The UK reported stronger than anticipated CPI in February. CPI incread by 1.9% in February compared to 1.8% in January.

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