Gold Price Analysis and Talking Points:
- Gold Price Surge to 2019 Highs, 5yr Trendline on Cusp of Breaking
- Fed Decision Key to Near-Term Direction
See our quarterly gold forecast to learn what will drive prices throughout Q2!
Gold Price Surge to 2019 Highs, 5yr Trendline on Verge of Breaking
Gold prices are soaring this morning following the break above its 2019 high ($1346) and as such is on course for its 4th consecutive weekly gain. The latest catalyst behind this morning’s jump in gold looks to be more technical, having broken above the prior YTD high. That said, with the backdrop of expectations that the Fed could provide “insurance” rate cuts in the near-term, speculators have piled into gold (speculative positioning). Consequently, with this in mind, next weeks decision will be key as to whether the central bank caves into market pressures and signal a readiness to ease policy, particularly given that US inflation expectations continue to head lower, suggesting that financial conditions are too tight.
Fed Decision Key to Near-Term Direction
The next leg higher in the precious metal will look depend on whether the Fed signals a reversal in monetary policy and look to cut interest rates. As mentioned in March (full story), risks are tilted to a move towards $1400 if this was to be the case. However, given that markets are aggressively priced in for Fed easing, the bar high for the central bank to meet the dovish market expectations (73bps worth of easing priced in by year end). Alongside this, if the Fed were to suggest that there is not a strong case to ease policy in the near-term, a sizeable repricing could see a pullback in gold.
Source: Fed rate expectations
GOLD Technical Levels
Resistance 1: Descending Trendline ($1360)
Resistance 2: 2018 Peak ($1366)
Resistance 3: 2016 Peak ($1375)
GOLD PRICE CHART: Weekly Time-Frame (Jan 2016-Jun 2019)
GOLD TRADING RESOURCES:
— Written by Justin McQueen, Market Analyst
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