Gold bid on poor trade-deal outlook and dovish Fed prospects while Dollar sinks to test 98 (DXY)

Gold prices have managed to climb 0.23% on the day, travelling between a low of $1,422.41 and a high of $1,431.05, supported by the 20-day moving average as muted U.S. inflation keeps the prospects for a Federal Reserve interest rate cut alive for this week as well as more to come later in the year. 

Gold prices have managed to hold a bid into the long-anticipated Federal Open Marke Committee meeting that kicked off today, due to conclude tomorrow with the release of the Federal Reserve's interest rate decision, which is widely to conclude in a 0.25% rate cut accompanied by a long list of ifs and buts which is where the real trade will lie. 

Markets will be looking to see whether the Fed' is on a new easing cycle, on course to cut rates deeper ver the next 18 months and by how much. The majority of the market is aligned, expecting a further rate cut in September and a further two rate cuts later on within an 18-month period and in the year 2020. However, should the Fed's statement point to something of the contrary, the Dollar will likely catch a bid on a 'hawkish rate cut' outcome. 

Today, the U.S. data pointed to muted inflation. The Commerce Department said that the Federal Reserve’s preferred inflation measure only rose 0.1% in June and was up 1.4% from a year earlier; This came in the form of the personal-consumption expenditures, (PCE). 

Trade talks

Meanwhile, there is a focus on China and Us trade talks that get underway just as President Trump lashed out at China, taking credit for weakening China’s economy and downplaying the likelihood of a deal before the 2020 election. Twitter posts and remarks to the press, came just as his top negotiators were sitting down to dinner with their counterparts at the Fairmont Peace Hotel in Shanghai.

“I think the biggest problem to a trade deal is China would love to wait and just hope,” the Trump said. “They hope it’s not going to happen, I hope, but they would just love if I got defeated so they could deal with somebody like Elizabeth Warren or Sleepy Joe Biden or any of these people, because then they’d be allowed and able to continue to rip off our country like they’ve been doing for the last 30 years.”

Trump is annoyed that China is not playing ball. After all, China has not begun buying large amounts of American farm products yet which was promised to US farmers after a June meeting with Chinese President Xi Jinping. This was an agreement made from a meeting in Osaka, Japan where Trump had agreed to postpone tariffs on an additional $300 billion of Chinese products and allow American firms to resume sales of nonsensitive goods to the Chinese telecom firm Huawei - But the deal was supposed to be reciprocal, and China was supposed to immediately start buying American agricultural goods - Clearly, the outlook for a transformative trade deal anytime soon is diminishing. This is also bullish for gold. 

Gold levels

Gold prices have stabilised above the 20-day moving average at 1415 and the 1400 round number remains intact, a level that is back-up by a confluence of Fibos lining ahead of 1382 swing lows. Bulls can target 1430/40 and 1450s key areas (a level on a Fed-induced spike which is within current daily ATR of $18.00). The 1480s comes thereafter, $2 above the current daily ATR. On an extension, the Fib levels of April swing lows to recent highs to the upside holds the 127.20% target around the psychological 1500 level. To the downside, bears can look to the 20-daily moving average, (then the 23.6% retracement is located at 1410), that guards 1373/76 zone meeting the 19th June spike correction lows.