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David Becker

Gold prices moved higher rebounded from session lows in the wake of the Fed’s decision to cut interest rates. While the FOMC made the decision to reduce rates, they are now likely on hold until economic data justifies additional stimulus. Ahead of the decision, the US Commerce Department reported a stronger than expected Q3 GDP, which grew by 1.9% year over year.

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Technical Analysis

Gold prices moved higher but remain rangebound moving back above short-term resistance which now supports near the 10-day moving average at 1,492. Additional support is seen near the 100-day moving average at 1,467. Resistance is seen near the October highs at 1,519. Short term momentum has turned negative as the fast stochastic generated a crossover sell signal. The fast stochastic is printing in the middle of the neutral range. Medium-term 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 declining trajectory that points to lower prices.


The Fed Cut Rates

The FOMC cut US interest rates by 25-basis points, to a range between 1.50-1.75%. The move weighed on the dollar which paved the way for higher gold prices. The Fed’s policy statement released Wednesday showed that the Fed will now use a higher bar for rate reductions. The committee voted 8-2 to lower the benchmark rate. The two dissenters preferred to hold rates steady. Fed officials have now cut rates three times since July to cushion the economy against a slowdown in business investment.

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