- A 25bp rate hike is priced in by the market as the focus is on the dot-plot.
- Gold bulls attempt to break $1320 ahead of FOMC.
Gold is trading at around 1319.50 up 0.64% on Wednesday so far as the market is awaiting the end of the two-day FOMC meeting which will likely provide the market with the confirmation of a 25 bp rate hike. The market will pay attention if whether or not the FOMC still sees risks as “roughly balanced” and if the median dot-plot moves up, according to Deutsche Bank macro analysts.
In the New-York session, US Existing Home Sales came better than anticipated however the news was largely ignored as investors are on hold before the Fed provides more clues to the number of rates.
Gold has been supported at the $1306 level among trade wars, geopolitical tensions and a fresh new bear leg in the US dollar since the start of 2018. The precious metal and the greenback have been pretty much inversely correlated since the start of the year as shown in the graph below. (Green line is for the greenback).
Gold vs USD
Gold daily chart
Since mid-February gold has been consolidating in a descending wedge. On the daily chart, the price is finding support yet again at the 1306 support and also close to the 100 and 200-period simple moving average. A bull breakout would likely lead the price to 1340, previous swing high, resistance; followed by the 1360 region, high of the year. On the flip side, a bear breakout below 1306 would open the gates to 1285 which is the 61.8% Fibonacci retracement from the December 2017-January 2018 bull run. Further down the 1260 figure should provide support as well. Technically the bull trend is still intact.
Gold 4-hour chart
The yellow metal’s bulls are trying to break above the 100 and 200 SMA (4-hour). The RSI and the MACD have posted a positive divergence but bulls will need a close above the 200 SMA and 1330 psychological level to be out of the woods.
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