Gold: a buying opportunity before the Fed meeting?
The gold market does not finish the week on a very strong note and could experience greater weakness in the short term, as it also did not reach new highs for the year, but did not succeed to stay above six key years. downtrend level. Despite recovering to its highest level in seven months in the middle of the week, gold was not able to maintain these gains, as prices closed the week down 0%, down 68%. 40 ounces Friday. Silver sees his four-week winning streak end with the latest $ 17 trading price.
225 ounces, down 1.7% from last week. According to some analysts, the gold market has taken the lead as the recovery earlier this week led prices to test key resistance just below $ 1,300 an ounce. Analysts have noted that the US dollar has managed to regain some momentum ahead of the Fed’s monetary policy meeting next week due to the weakening of the euro and the pound sterling. The dollar creates strong headwinds for gold and even a “dovish” rate hike next week may not be enough to revive the yellow metal.
“I think the market is already expecting a dramatic rate hike,” said Colin Cieszynski, Senior Market Analyst at CMC Markets. The Dollar Index is trading at 97 before rising rates. Before the March rate hike, the dollar was trading at 102, “he said. Cieszynski expects prices to fall in the near term, but adds that he remains optimistic about gold over the long term and sees any decline as a buying opportunity. He added that he would not be surprised to see gold eventually test the support at a 200-day moving average at $ 1,252 an ounce. “Despite the weakness in the short term, gold is still in an upward trend.The number of risks approaching the fall is increasing, which will be optimistic for gold in the long term, “he said. Christopher Vecchio, Senior FX Strategist at DailyFX. com, It also expects prices to fall in the near term, but considers the current correction as a buying opportunity. He added that the ever-increasing risks that the Federal Reserve would be forced to reduce its interest rate expectations given that wage growth and inflation remained muted.
He added that this year is not enough. Markets See 100% Chance Of Hike Rate Next Week. Heading into next week’s Federal Reserve monetary policy meeting, CME 30-Day Fed Funds future are pricing in a 100% chance of a rate hike; However, markets are looking forward to having a third or fourth rate hike. Currently, markets are pricing in a less than 50% chance that rates will rise to a third time in December. Vecchio said that these low expectations do not create some risk for gold later in the year. “If the economic data starts to improve then there is scope for expectations, it can weigh on gold,” he said. US Interest Rates Are Outweighing Geopolitical Uncertainty For Now.
Election saw Theresa May’s Conservative Party lose a majority, resulting in a hung Parliament ahead of the start of Brexit negotiations next week. Jasper Lawler, senior market strategist at London Capital Group, said that the UK election result is a fairly complex issue and could be too big for global markets to focus on. Instead, traders are taking a simplified view, buying the U.S.
Dollar and punishing the pound as a result of the election. That strength in the U.S. dollar is what is driving gold prices lower, said Lawler. “Markets see this as a domestic issue now and maybe the results don’t justify a bid in gold at the moment,” he said. “You can’t deny gold’s failed break out. The drop off we have seen is not something you would expect to see in a bullish uptrend.”.
With gold’s failed breakout, investors are back to watching the key level at $1,280 an ounce, which represents a six-year downtrend. Not only does gold have to break that but according to some analysts, prices have to close above the April highs to regain enough momentum for a sustained break above $1,300 an ounce. With analysts seeing renewed downside momentum, they say that the first key support level is at $1,260 an ounce, which represents an uptrend from the December 2016 and March lows. Some analysts are also watching gold’s 200-day moving average as an important support level, which comes in at $1,252 an ounce. The last key support level comes in at $1,236 an ounce, a 38. 2% retracement level from December’s low to April’s high. While next week’s Federal Reserve interest rate decision is the main event next week, there are other important events that could create some volatility in markets.