Gold Moves Treads Water ahead of the FOMC

The price of gold seems to have found some short term support and is moving up from the month low near $1,151.07 per ounce. The rebound, albeit a small and unconvincing one which is barely treading water, comes just before this Wednesday’s Federal Open Market Committee (FOMC) monetary policy decision. This announcement will directly influence, not only the price of the yellow metal, but the US Dollar.

Right now, if you look at the below daily MT 4 chart, the price of gold remains in a short-term down trend. Price action is well below the 200 day moving average as well as the 10 period exponential moving average (EMA) which is near 1,173.55. Should Dollar strengthen, then gold will continue to move lower. Should the US Dollar weaken, then gold should move higher and towards the 200 day moving average at $1,276.30 per ounce.

This morning, gold was little changed after inching higher yesterday. The FOMC is beginning their two day policy meeting later in the day.

Spot gold was steady at $1,162.40 an ounce at 2:40 am GMT, after moving 0.4 percent higher yesterday. US gold futures were down 0.1 percent, at 2:40 am GMT, to $1,165.00 per ounce. The price of spot gold has bounced up from a 10 month low of $1,151.35 per ounce, reached in yesterday’s session. The price of spot tracked US Treasuries which came off their highs as the US Dollar fell.

Gold is very sensitive interest rates. Rates lift the opportunity cost of holding non-yielding assets like the yellow metal and with the increasing likelihood of the Fed raising interest rates at their FOMC meeting, investors continue to move out of the bullion.

The Fed is likely to raise rates for the first time this year from 0.25 percent to 0.50 percent. This would be a 25 basis point increase.

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