09:28, 15 November

Enjoys Much Needed Support from $1200 as Fed Commentary Flows

Gold has been sold off strongly in the last week or so after struggling with the resistance level at the $1240 level for several weeks. It has enjoyed some solid support from the key $1200 level in the last few days propping up the precious metal. For the last few months, gold has been content to trade close to the $1200 level although it did enjoy the surge higher in the last month. It did attempt to move through the resistance level at $1240 and did move to a four month high just above $1240 before being sold off again. It has received both support and resistance from the $1200 level in the last couple of months and didn’t appear to be in any rush to move too far away. The $1240 level was significant several months ago when gold received some short-term support there and subsequent resistance, and yet again it has struggled with this.

Given the amount of time that gold consolidated around the $1200 level, it wouldn’t surprise anyone if it continued to do that now that gold has eased lower from its recent move higher. Throughout the second half of June gold dropped sharply to fall to a then low for 2018 below $1240 before being propped up at this level. The key level of $1240 had been a steady rock of support in the last 12 months for gold so it is likely to offer some reasonable selling should it continue to rally higher.

After falling for several years up until the end of 2015, which saw it fall from its all-time highs down to around $1050, gold has done well in the last few years to regain some of those losses, although it is really returning the gains in the last few months. It had climbed back above $1300 on several occasions since then and generally in the last 15 months it had been steadily climbing higher from around $1100.

The former head of the U.S. Federal Reserve Janet Yellen believes that the Fed will continue the current pace of normalising its monetary policy because the American economy is doing “exceptionally well”.“Normalisation of both short rates and the balance sheet are proceeding smoothly and, with the economy performing so well, Chair Powell and the Federal Open Market Committee are continuing the process of removing monetary accommodation to return the federal funds rate to a neutral stance,” Janet Yellen said.She added that she expected rates to rise by three to four times over the next year, “I expect that to continue over the next year unless there are significant economic surprises.”Meanwhile, CNBC’s Jim Cramer believes the Fed needs to take note of the economic forces already weighing on the U.S. economy before it plans more rate rises for 2019.He said, "It's important to recognize that the most important inputs ... for future inflation are already going lower, not higher. It'd be crazy to ignore that.While I think [Fed Chair Jerome] Powell's been mistaken in his approach, he's not crazy. The man is prudent — there's no reason for him to be rash, especially not with the deflationary impact of the strong dollar helping him."