Gold's Bearish Stability Waiting for Developments - 23 May 2019
The recent downward movement of the ounce of gold was consolidated after the release of the US Federal Reserve last meeting’s minutes, which confirmed some members’ desire to raise the US interest rate. This supported the gains of the US dollar and thus stabilized gold prices downwards around the $1271 support level. We're waiting for a stronger stimulus to return to the psychological high $1300 which supports the gold bullish trend, especially as the factors supporting the uptake of safe havens are increasing.
The US dollar was second only to the Japanese yen in gaining as a safe haven as the US-China trade war recently intensified. In general, the absence of a final and formal agreement that ends the trade dispute between the United States and China will continue to be a factor contributing to stronger gold price gains, and establishing above the psychological peak of $1,300 will increase purchases and test stronger bullish levels. Trump's recent comments, which bear the prospect of reconciling with China after raising tariffs on their products, have eased investors' concerns and have contributed to a halt in gold price gains.
The Federal Reserve Board kept the interest rate unchanged as expected and indicated it was unlikely to raise or lower interest rates in the coming months amid signs of renewed economic health while at the same time inflation was still unusually low. The Bank's policy statement highlighted its continued failure to raise the annual inflation rate to at least 2%. The statement may have raised expectations that a change in the next Fed interest rate is a rate cut to stimulate inflation or growth.
Technically: If gold prices stabilized today below $1300, it will increase the bearish momentum and the nearest support levels will be 1273, 1265 and 1258 respectively, which support the strength of the bearish trend while at the same time levels can be bought for close targets. On the upside, the nearest levels of gold resistance are currently 1286, 1300 and 1312, respectively. We still prefer to buy gold from every bearish bounce.
In terms of economic data: The yellow metal will all focus on the US dollar level. Gold will also be affected by investors' risk appetite. Gold is one of the most important safe havens.
- Currency Pairs