Gold to Highs Since 2013 on Fed, 100% of Probabilities of a Rate Cut in July

Gold is trading at highs since 2013 as the dollar is getting hurt by the notion that the Federal Reserve will cut interest rates for sure in July.
Mauricio Carrillo
Gold to Highs Since 2013 on Fed, 100% of Probabilities of a Rate Cut
Gold to Highs Since 2013 on Fed, 100% of Probabilities of a Rate Cut

Gold is rallying for the third day in a row but this time with more violence as investors welcomed Federal Reserve dovish stance and it signaled a possible rate cut as soon as next month.

Other metals such as silver and palladium are trading higher too with the XPD/USD consolidating gains above the 1,500 level. Only the Platinum is having problems to extend benefits, though it is positive on the day too.

The dollar index is falling hard for the second day in a row with the index testing now the 200-day moving average at 96.55. This level has been acting as a support for the Greenback in the last year with actually five tests since January.

If the DXY breaks below the 96.55 area, it will have a free way to the 95.55 critical support. A move that will fuel metals upside even more.

Metals report on June 20, 2018

XAUUSD post fed daily chart June 20

Gold jumped to trade as high as 1,394, its highest level since September 2013. The metal is now in consolidation mode as it is pricing 1.70% positive in the day at 1,380. The metal has now new support at 1,360 and a solid floor at 1,340.

As Saxo Bank commodity strategist Ole Hansen said in a recent note, “the driver for the surge is obviously the Fed delivering the dovish tilt that the market was looking for. It removed the ‘patience’ approach to cutting rates.”

Technical indicators suggest that the gold will extend gains in the next days and the 1,400 seems a matter of time. A weak dollar index is supporting gold’s upside.

Silver is rallying for the third day after the unit broke above the 15.20 area on Thursday to trade as high as 15.40, its maximum since March 27. The odds have changed, and the metal looks bullish now, especially after consolidating levels above the channel between 14.60 and 15.10.

Copper also broke a significant resistance on Thursday. A weak dollar helped the XCU/USD to break the 2.7015 level and to trade at highs since May 21 at 2.7335. Next resistance is now at the 2.7600 area where the 50 and 200 days moving averages are in confluence.

As reported yesterday, palladium was ready to break above the 1,500 area, and it delivered on Thursday. XPD/USD is joining the weak dollar and pro-metals environments, and it is extending gains for the tenth day in the last eleven with the unit reaching the 1,535 level, fresh high since March 27.

Platinum extended its recovery from the 790.00 area, and it is now testing prices above the 820.00 level. However, the metal doesn’t look too strong enough to close above that area.

Traders expect a rate cut in July, and they are pricing in

FedWatch Tool June 20

Investors are taking a rate cut on July for sure according to the CME FedWatch Tool with a 61.5% of probabilities for a rate of 25 basis points to 2.00%-2.25% from the current 2.25%-2.50%.

In the same way, 38.5% of traders believe in a 50 basis points cut to 1.75%-2.00%. There are no probabilities for the Fed to maintain rates unchanged. At least it is what the FedWatch tool says.

So, investors are trading with that condition in mind, and the dollar is suffering the consequences and the Euro, Pound and metals such as gold and silver enjoying the situation and reaching highs against the Greenback.

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