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Price of Gold Fundamental Daily Forecast – Bullish Traders Betting Fed Has It Wrong With Eyes Set on $1284.10

By:
James Hyerczyk
Published: Dec 20, 2018, 12:18 UTC

Gold is at a key area on the charts. The trend is up and momentum is building. Although the February Comex gold market stopped at $1262.20 on Wednesday, I don’t think this level is resistance. I think investors stopped buying due to confusion over the Fed. I don’t see any true resistance until $1284.10 so there is plenty of room to the upside.

Comex Gold

Gold prices are trading higher on Thursday shortly before the regular session opening. The rally is being fueled by a steep sell-off in the U.S. Dollar against a basket of major currencies especially the Euro which is trading at its highest level since November 7.

The catalyst behind the rally in gold is the U.S. Federal Reserve’s monetary policy decisions from Wednesday. Although the central bank was not as dovish as investors had expected, it still reduced the number of interest rate hikes for 2019 from three down to two. This move is likely fueling today’s drop in U.S. Treasury yields, which is helping to make the U.S. Dollar a less-desirable asset. A weaker U.S. Dollar tends to drive up foreign demand for dollar-denominated assets like gold.

At 1216 GMT, February Comex Gold is trading $1260.00, up $3.60 or +0.29%.

Fed Recap

On Wednesday, the U.S. Federal Reserve raised its benchmark interest rate by 25-basis points but it also reduced the number of expected rate hikes in 2019. Going into the Fed’s decisions, gold traders were expecting the Fed to announce it would take a pause in its aggressive monetary policy in 2019. In other words, there would be no rate hikes. Additionally, traders expected the Fed to be a little more cautious due to rising uncertainty about global economic growth. However, investors were surprised by the Fed’s commitment to retain the core of its plan to tighten monetary policy.

There were some small tweaks in the monetary policy statement including lowered growth and inflation expectations. However, these subtle changes were not as significant as investors had hoped.

Forecast

Gold is at a key area on the charts. The trend is up and momentum is building. Although the February Comex gold market stopped at $1262.20 on Wednesday, I don’t think this level is resistance. I think investors stopped buying due to confusion over the Fed. I don’t see any true resistance until $1284.10 so there is plenty of room to the upside.

Gold traders are going to be watching the Treasury yields all session because they seem to be indicating the United States may be heading for a sharp economic slowdown in 2019 despite the Fed raising interest rates for the fourth time in a year.

Gold could be benefitting from the turmoil being created by the Fed’s decision. The Fed is still leaning toward tightening next year and perhaps into 2020, however, the Treasury market is saying the central bank has got it all wrong. Gold traders seem unconvinced that the Fed will raise rates twice in 2019. Bullish traders are barely pricing in one increase in reaction to heightened market concerns due to the weakening global economy.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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