09:21, 04 June

Surges to Three Month High Around $1325 on Fed Reconsider

In the last few days gold has remarkably surged higher to move sharply away from the key $1270 level, through any resistance at $1300 and to a three month high around $1325, before easing in the last few hours. It had been content for the week or so prior to enjoy support from the $1270 level, a level which had ably support the precious metal for the last six weeks or so, despite its best efforts to push lower. 
A few weeks ago, gold surged higher to its highest level in a month reaching and testing the key level of $1300 before declining again back to $1270. For the best part of the last month or so, gold has consolidated and traded between $1270 and $1300, before its recent surge and departure from this trading range.

Earlier in April, 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. The $1300 level has played a significant role with gold in the last few months and has more recently offered strong resistance to any movement higher. This level will be likely to offer some support now should gold decline in the near future. 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 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, so its recent surge is quite significant. 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 minutes from the Federal Open Market Committee meeting held on 1-2 May made it clear that no rate moves are coming ‘for some time’ even if the economy improves. Whilst saying that rates likely will remain unchanged well into the future, Fed officials remained firmly committed to a “patient” policy stance. However that tune is starting to change with St. Louis Federal Reserve president James Bullard being the first to come out and suggest that a rate cut “may be warranted soon”. Most policymakers have been wary of talking up the prospects of rate cuts, however Bullard, who is a voting member of the policy-setting FOMC, said lower interest rates might be “warranted soon”, citing trade war risks, slowing global growth and the lack of inflationary pressure in the United States. “The FOMC faces an economy that is expected to grow more slowly going forward, with some risk that the slowdown could be sharper than expected due to ongoing global trade regime uncertainty,” Mr Bullard said in a speech. “In addition, both inflation and inflation expectations remain below target, and signals from the Treasury yield curve seem to suggest that the current policy rate setting is inappropriately high.”