Gold confined to familiar ranges ahead of FOCM showdown
|- Spot gold has been trading between the familiar narrow range but was making a lower high for the European and NY sessions whereby Monday's high was capped by the $1,204 resistance and Tuesday's high was $1,203.53 while lows were compensating higher on the day at $1,197.02 compared to the $1,191.99 low on Monday.
Gold was taking some advantage of an early offer in the greenback as investors get set for the FOMC's 2-day meeting outcome tonight (Wednesday NY) where there are mixed outlooks from analysts, (takes two to make a market), as to whether the end result will be on the dovish or hawkish side. The greenback's immediate fate depends on this event considerably so, as does gold's. US yields are an additional factor and while they continue to rise, with the US ten years basing o the 3% handle and peaking at 3.115% on Tuesday before sliding down to 3.10 in the NY, this can play out as a negative input for the precious metal that doesn't offer a yield and the dollar , that tends to move inversely to gold, may well play catch up depending on the FOMC outcome.
FOMC outlook
Fed Preview: Market Moving Fed Policy?
The market is pricing in over a 90% chance of a quarter-point rate increase and analysts at TD Securities forecast that the event will result in a few more dots at four rates hikes for this year:
- "Later dots will show most support hiking beyond neutral, while the median longer-run dot could drift down to 2.75% thanks to newly-added participants. This risks modifying the statement language to suggest “policy remains somewhat accommodative.” Risks should remain balanced, with Chair Powell downplaying some of the downside risks that have preoccupied markets of late.
- With the recent rise in rates, the market is well priced for our base case. A move lower in the long run dot or modification of stance of policy can be construed as a dovish sign. A dovish lean by the Fed is a tide that would lift all boats in FX, supporting both DM and EMs.
- The market is pencilling in four rate increases in 2018. However, traders have shown some flashes of wavering confidence amid trade spats and signs of global economic slowing.
Gold levels
Gold Technical Analysis: Calm before the FOMC storm on Wednesday
Gold is trading between a familiar $1187/$1214 range while bears target a break below the base of the daily cloud at $1195 initially. There are otherwise upside prospects on a break of last week's Doji candle high through 1204 while bulls look to make a run all the way back to $1309. Initial resistance is located at 1204, 1208, 1214 and 1217
while a break below the 1200 psychological level opens 1195, 1191, 1187 and 1183.
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