09:57, 14 May

Surges to Key $1300 Level as Fed Expected to Cut Next

In the last 24 hours gold has surged higher to its highest level in a month reaching and testing the key level of $1300. For the best part of the last few weeks gold has consolidated and traded between $1270 and $1290 after falling through the $1300 level earlier last month. Several weeks ago gold fell sharply from sitting just above the key level of $1300 to fall to a new low for 2019 just below $1270, where it received solid support from.
During the last few weeks gold was looking likely to test the support at $1270 and move lower again to new lows for 2019 however its recent surge has put those concerns aside for the moment. The $1300 level has played a significant role with gold in the last few months and it will be interesting to see if the sellers jump in again at this level and prevent prices from moving much higher.

Earlier in February, gold was cruising along pushing to new nine month highs on the back of solid support from the key $1300 level, before crashing lower pushing through any support at the $1300 level and starting to challenge any of support at this level. Since the highs in February, gold has reversed and formed a medium term down trend with its lower peaks and lower troughs. There has been a little bit of support at $1290 propping up gold just below the $1300 level however this recent fall has shattered that too.

In late January gold enjoyed a solid push higher, breaking through resistance at $1300 and establishing a new trading range above this level. The significance of $1300 is for several weeks, gold met stiff resistance at this level, after enjoying a healthy surge higher throughout December. The move higher in December saw gold move to a then six-month high just shy of $1300 after enjoying some solid support from the key $1240 level and the $1200 level before that. The $1240 level may play a role again should gold continue to decline as it is the next obvious support level.

A few weeks ago the U.S. Federal Reserve (Fed) held interest rates steady and indicated little urgency to adjust them any time soon, based on economic growth and continued job gains, and the likelihood that weak inflation will edge higher. “We think our policy stance is appropriate at the moment; we don’t see a strong case for moving it in either direction,” Fed Chairman Jerome Powell said in a press conference following the end of the central bank’s latest two-day policy meeting. “I see us on a good path for this year”, he said. However more economists are increasingly saying the Fed’s cycle of interest-rate increases is over, and that its next move will be a cut. Now that U.S. President Donald Trump has followed through on his threat to increase tariffs on U.S. imports from China, the Fed will probably be more inclined to cut interest rates, however many believe it won’t be in any rush to do so. Federal Reserve Bank of Atlanta President Raphael Bostic told reporters on Friday that the central bank could reduce rates if the higher tariffs prompt a severe cutback in consumer spending. “If this becomes prolonged and the extra cost gets fully passed on to consumers such that they pull back in a number of different ways, then that may mean we have a different calculus that we have to do to decide what appropriate policy looks like,” he said in Meridian, Mississippi.