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David Becker
Gold

Gold prices tumbled on Thursday, as traders buoyed the dollar following Wednesday’s decision by the Federal Reserve to increase interest rates. What was clear from the Fed decision is that looking forward the Fed will continue to raise rates until 2020.  When rates hit 3.375%, the Fed believes they will have hit neutrality. As the yield differential moved in favor of the greenback, the dollar rose weighing on the yellow metal. Since gold is priced in dollars, a strong dollar makes gold less attractive in other currencies. US pending home sales disappointed as supplies rose but not where demand is available.

Technical Analysis

Gold prices dropped on Thursday hitting a fresh monthly low, as the dollar gained traction. Target support on the yellow metal is seen near the August lows at 1,160. Resistance is seen near the 10-day moving average at 1,198. Momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices.

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The Fed Tightens Rates and Will Continue to Raise in 2019, and 2020

The FOMC tightened rates by 25-basis points and the majority of Fed officials see rates rising again in 2018. The Fed removed the term accommodative from their statement, but in a press conference Chair Powell said that rates still remain accommodative. The Fed provided projections for 2021, which shows no additional increases in the Fed funds rates. The Fed altered its growth forecasts increasing their growth figures 3.1% from 2.8% for 2018. The Fed raised its 2019 growth forecasts to 2.5% from 2.4%. The Fed kept its growth forecast for 2020 at 2%.

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