Gold Needs To Close Above $1,315 To Confirm New Momentum
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Yesterday’s close: Settled at 1301.7, down 4.8
Fundamentals: Gold settles at 12:30 pm CT which does not take Fed meeting or Minutes into account at 1:00 pm CT. Price action surged yesterday after the Fed confirmed even the most dovish projections. They signaled no rate hikes this year and one in 2020, adding that they will end unwinding their balance sheet in September (known as Quantitative Tightening or QT). While this is a more accommodative Fed than imagined for the foreseeable future and the Dollar Index traded sharply lower late yesterday, it is bouncing back this morning with the British Pound getting tagged by a penny amidst Brexit chaos and after the BoE policy meeting this morning. The Swiss National Bank also help a policy meeting this morning and the Franc is lower. These coupled with soft PPI data from Germany and a stronger than expected Philly Fed Manufacturing has forced the Euro to give back the bulk of its gains this morning, strengthening the Dollar. On the bright side, Gold is holding ground very well given this recovery in the Dollar Index. The USD/CNY is still in the red though it has pared some overnight losses; a weaker USD/CNY is very supportive to Gold.
Overall, the landscape in which the Fed provided yesterday is exactly why we have been unequivocally Bullish in Bias Gold and will remain such. Treasury yields in the U.S and those from around the world are all lower and we view this as fuel for the metal.
Technicals: Price action is holding firm, but we must see a close above 1315.3 in order to confirm this upbeat momentum. Gold faces major three-star resistance at 1323.4-1326 and this level must not be ignored, we view it as one in which if Gold closes above, we could begin to see it melt higher. Until then, the bears will defend rallies, and the range will be very tradable.
Resistance: 1323.4-1326***, 1342-1350***