11:34, 14 June

Daily analysis

Surging Towards Resistance at $1350 on Fed Rate Cut Expectations.

In the last few days gold has reversed and made another run towards the key level at $1350. Significantly the $1350 level has provided stiff resistance to gold on numerous occasions in the last couple of years and is now playing a role again having repelled gold’s surge a week ago. It is now making another attempt at this level however it is quite likely to be rejected again.
In the last few weeks gold has surged higher to move sharply away from the key $1270 level, through any resistance at $1300 and to a one year high just shy of the $1350 level. 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.

In May gold surged higher to its highest level in a month reaching and testing the key level of $1300 before declining again back to $1270 and for the best part of April and May, gold 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 soon.

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.

Gold has been well supported of late due to escalating trade tensions, and concerns around a slowing U.S. economy or recession, which has all increased expectations of a U.S. Federal Reserve (Fed) interest rate cut in July. The Federal Open Market Committee meeting are scheduled to meet next on 18 – 19 June, with traders pricing in at least two rate cuts by the end of the year. There have been some recent signs that the U.S. economy is slowing, with weak consumer price data and employment data. Risk appetite in the markets is likely to work against gold, but the dollar looking vulnerable is clearly supportive. Taking a hint from Fed Chairman Jerome Powell to heart, financial markets are placing high odds on the central bank reducing interest rates soon, however not next week. Trading in interest rate futures shows a 76% chance that the central bank's monetary policy committee leaves them at the current range of 2.25% to 2.5%.