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Gold Price Prediction – Gold Whipsaws After Fed Rate Cut

Gold trades sideways as the dollar rallies
David Becker
Gold daily chart, September 17, 2019

Gold prices whipsawed in the wake of the Feds FOMC meeting. The Fed cut the Fed Fund rate by 25-basis points to a range between 1.75%-2.0%. which was widely expected. There were 3-dissents. Two of those dissents were for not interest rate cut at all and 1, was for a 50-basis point cut. The Fed is divided. Of the 12-FOMC members, 5-who were not voting members, would not vote for another cut this year. Of the total 12-members, 7-see room for another cut in 2019, and 5-see rates unchanged. Yields edged higher which buoyed the US dollar putting some downward pressure on gold prices.

Technical Analysis

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Technical Analysis

Gold prices edged higher in the wake of the FOMC meeting and geopolitical risks remain. Prices were able to push through the 10-day moving average at 1,505, which is seen as short-term support. Additional support on the yellow metal is seen near the 50-day moving average at 1,479. Short term momentum has turned positive as the fast stochastic generated a crossover buy signal in oversold territory. Currently the fast stochastic is printing a reading of 23, which is slightly above the oversold trigger level of 20. Medium-term momentum is negative to neutral as the MACD histogram is printing in the red with a flat trajectory which points to consolidation.

The Fed cut rates, and the market quickly turned to focus on what will happen in the future. The yield differential moved in favor of the dollar as traders began to buoy US yields related to foreign yields. Since gold prices are quoted in US dollars, as stronger dollar weighs on gold. The dot plots were nearly unchanged, and the Fed lower the excess reserve rate which is also a stimulus.

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