Gold Prices Talking Points:
Gold Price Shake and Bake Around FOMC, Trump Tariffs
It was a busy week in gold prices as gold markets swung aggressively in both directions. The FOMC rate decision in the middle of the week made a dent; but nothing that could last as the increased tariffs announced by President Donald Trump less than 24 hours later brought buyers to the bid and Gold prices rushed back up to the 1450 level before stalling into the weekly close. This retains the bullish backdrop that’s come to define Gold trading over the past two months, and as the latter-portion of this year looks to bring even more dovishness out of global Central Banks, that theme appears likely to continue.
Gold Hourly Price Chart
Timing the Bullish Theme in Gold Prices
The big question around Gold prices at the moment is one of timing. As Central Banks have rushed into more dovish, passive positions in response to slowing growth and moderating inflation, there’s been little hindrance to the topside advance. This has been especially clear during Q4 of last year and then again in June of this year. Gold prices put in some very serious incline as markets were pricing-out rate hikes from the Fed and starting to price-in rate cuts.
But at this week’s FOMC rate decision, the bank appeared non-committal to future cuts. This dented the price of Gold as the yellow metal trickled back down to the 1400 area on the charts. There was even the prospect of a deeper short-term pullback, brought upon by markets continuing to price-out that next rate cut from the Fed. But, that scenario never came to be as President Trump announced increased tariffs on China less than 24 hours after the FOMC rate cut produced a fresh two-year-high in the US Dollar. This sent the USD reeling lower and Gold prices pushed right back towards the 1450 level in response.
Gold Daily Price Chart
Gold Prices Technical Outlook: Bullish
As discussed in these pieces of recent, a bullish backdrop around Gold is likely here to stay for a while. Global Central Banks have an almost unified dovish approach and despite a lack of coordination, it doesn’t appear as though there are many that are entertaining the prospect of tighter policy anytime soon. The bigger question is if we’re yet at a spot where buyers will be able to punch up to fresh six-year-highs? At this point, price action remains subdued below that prior high water-mark that was set a couple of weeks ago, but this is coupled with a bullish engulfing pattern from this week’s price action. Such a formation will often be approached with aims of continuation and in this case, for aggressive bulls, this can keep the door open for topside scenarios on the chart.
Gold Price Weekly Chart
Gold Price Strategy Moving-Forward
Taking a step back on the chart and prices remain near an imposing level of resistance. A weekly close above 1433 would mark the first such instance since May of 2013, so, perhaps rightfully, more conservative traders may have reservations about chasing this move, even despite the bullish engulfing bar showing on the weekly chart.
So, there are a few possible ways of moving forward. For the aggressive approach, topside breakout potential exists upon prints above that six-year-high that was set in late-June. This takes place around 1453, and a bullish break beyond that level opens the door for target potential around 1475. Alternatively, for traders that would prefer to look for pullbacks in the effort of concentrating risk outlay or, just playing the scenario more conservatively, pullback potential can remain. The same levels that came into play this week, around 1415 and 1400 could remain of interest for support. And a bit deeper, in the event that a larger pullback does develop; longer-term support potential remains around prices such as 1375 and 1357.50, each of which were significant points of prior resistance that haven’t yet been tested for support since the June bullish breakout took hold.
Gold Four-Hour Price Chart
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— Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX