Another test of the 1800/10 level in spot gold is behind us. With the FOMC meeting on Wednesday, it makes sense to see prices trade within a range as the market awaits Jerome Powell’s comments on future rate policy (a 50bp hike is widely telegraphed and expected). In this trader’s opinion, participants should remain open-minded to markets delivering an upside surprise as Powell may follow suit with Bank of Canada governor Tiff Macklem in projecting a deceleration in rate hike intensity. Markets would likely respond very bullishly to a dovish tone, especially if accompanied by an unchanged dot plot.
Below is an updated 4-hour gold chart; Bulls would like to continue to defend the 1750 - 1763 level. A higher high this week would, however, probably lead to the $1850 level we have been suggesting would come after a breach of $1810. Should the price break below the rising line, the dip to 1750 - 1763 becomes the probability first.
On the daily chart of the SPY shown below, momentum is already in an oversold position and the Bollinger bands have tightened. Although a fill of the downside gap remains a distinct possibility, it is less of a probability than it was just last week.
A look at the monthly chart of the gold/silver ratio below shows the breakdown since we last showed it in November, as it teetered at the confluence of support that has since given way. If momentum reaches all the way into oversold conditions -- as it should before a move bottoms out -- then the ratio seems to have further to fall on this time scale.
Thanks and have a great week,
