Gold: the quiet before the FOMC and trade war storms, eyes on the dollar

• Spot gold dropped heavily on Friday and has been trading with a bearish tendency in thin holiday Asian markets at the start of the week.
• Spot gold is currently trading at $1,196.37 vs a high of $1,199.68  and low of $1,195.98.  
• DXY to gain some strength into the FOMC to pressure Gold. 

The dollar could find some support and demand into the FOMC this week while the price of the precious metal was trodden on by bears that took their cues from the trade war angst that has heated up over the past few sessions, supporting the greenback. However, that didn't stop Wall Street and the benchmarks continuing with their impressive performance, underscoring optimism about the U.S. economy. However, as we move through the week, things will fire up on the scheduled FOMC while ears will be left on the ground for any implications resulting from the Chinese not playing dancing to Trump's song in the tariff war.

The Chinese have refused to attend trade talks

The Chinese have refused to attend trade talks that were scheduled for this week and that risks retaliation from the White House that may impose tariffs across the remaining Chinese imports. Earlier in the month, President Trump said that he was ready to impose tariffs on 100% of goods if Beijing did not change its trade practices - It’s time to take a stand on China,” Trump said in an interview late Thursday with Fox News. “We have no choice. It’s been a long time. They’re hurting us.”

However,  China plans to retaliate on the US’s $200 billion tariffs round by slapping levies on $60 billion of American goods and marking a steady march toward a long-term competition between the two nations. On Friday, China demanded the US withdraw penalties it placed on a defence agency and its director for purchasing Russian weapons in violation of American sanctions or “bear the consequences,” which is the latest round of shots fired and we await to hear Washington's response this week. 

• The week ahead: week will kick off with RBNZ and FOMC - Nomura

Gold levels

As noted by Omkar Godbole, an analyst at FXStreet, "Gold is stuck in a narrow range and could suffer a downside break if the Fed stresses on overshooting the neutral interest rate."

• Gold Price Forecast: Range play intact, focus on Fed's forward guidance

"Essentially, gold has created a big bearish outside-day candle today, still, the immediate bias remains neutral, the technical chart indicates. "
 
"A break below the channel support could be considered a sign the corrective rally has ended and could yield a re-test of the August low of $1,160."

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