Gold breaks $1,335.00

Gold Futures printed fresh highs near $1,335.48, coming from $1,323.00 lows in London morning trade. The Fed’s shift to a dovish holding pattern at the last FOMC meeting, along with uncertainty over US-China trade talks, have both been supportive of gold prices.

The break of $1,335.00 level reflects the break of 61.8% Fibonacci extension from last week’s correction lower. Hence a close above the latter could open the way towards the $1,342.00 level (midpoint of 61.8-100.0 FE) and $1,352.00 (100.0 FE and within 2018 high area). Support holds at today’s low at $1,320.00.

Today’s drivers for Gold were the more dovish views on the FOMC and the ECB, despite the mild risk aversion globally, which weighed modestly on US equities. Trade remains a focal point for the markets. US-China talks will take place in Washington on Thursday and Friday, providing some modest support for equities amid cautious optimism that a deal will be struck and additional tariffs avoided. However, the EU’s threat to retaliate if the US follows through on fresh levies on imported autos from Europe is a timely reminder of the downside risks around the outlook for global trade.

Meanwhile, earlier, Fed’s Mester reiterated support for  the FOMC’s wait-and-see-approach in her speech on The Economy, Monetary Policy, and Policy Communications. She also said the economy is dynamic, and the Fed is data dependent. But she also said that “‘Data-dependent’ also doesn’t mean that policymakers will be unsystematic in their approach to policymaking. Policy needs to be flexible to respond to changes in economic and financial developments that inform the outlook, but the response should be fairly predictable and not a surprise if those developments occur.” On that note she added that the Fed’s communications need to transition. She is still forecasting a 2% to 2.5% economy in 2019, with the unemployment rate at or below 4%, with inflation near 2%. And if her outlooks are met, rates may need to go a bit higher, she said. The Fed will likely finalize its balance sheet plans in upcoming meetings. Mester is not a voter this year but she is one of the more hawkish on the Committee.