The gold market sees the $5,000 level as a comfortable area, as we are waiting for several central banks to make decisions, with the Fed front and center on Wednesday.
Gold
The gold market continues to see a lot of sideways action right around the $5,000 level on Tuesday as there are a lot of reasons for bullish gold, but at the same time, there are some things working against it. The first thing that I’m paying close attention to is the fact that pretty much any country of significance that has a central bank has a central bank meeting sometime this week. So that does have the markets a little bit suppressed I think due to the fact that nobody really wants to stick their neck out too far.
The Federal Reserve of course is on Wednesday, that’s probably the biggest one, and there will be questions as to whether or not the Fed will remain hawkish or if they will start to soften a bit. I think at this point in time it’s pretty obvious that they have to remain somewhat hawkish, although I’m not expecting any type of rate hike. I think it’s just a matter of inflation is probably going to continue to be a major issue.
Technical Outlook and Support Levels
From a technical analysis standpoint, you have to recognize that the $5,000 level seems to be like a magnet for gold and that makes sense because traders like these large round psychologically significant figures and that of course is exactly the attitude that you would expect in a scenario where we just don’t know what to do. Even if we were to break down from here, I see massive support at $4,800 underneath and $4,600 below there.
With this, I remain bullish, but I also recognize that you need to get through a lot of these central bank decisions over the next couple of days to get an eye on where monetary policy is going to be going in places like the United States, Europe, England, Japan, Canada, and we’ve already seen Australia, which did raise rates. If we start to see a little bit more of a tightening cycle, that could be very bad for gold. It’s too early to make that call, but as things stand right now, I think we just hang around this area for the next couple of days.