Gold Prices Could Drift to $1381 on FOMC Rate Cut Disappointment

Published by

Written By: Alejandro Zambrano

Aug 01, 2019, 11:08 BST 11:08

gold price

Summary:

Gold prices (XAUUSD) are under pressure as the Federal Reserve reduced their key rate by 25-bps at their latest FOMC meeting, instead of 50-bps.

Gold prices (XAUUSD) are under pressure as the Federal Reserve reduced their key rate by 25-bps at their latest FOMC meeting, and in that way caught out the 1/5 of traders that were anticipating a 50-bps rate cut. The dollar strengthened across the board and sent gold prices to levels seen in mid-July. Going forward, I anticipate gold prices to add to their losses but that they will be limited to $1381, as the price remains rangebound in the $1381.29 to $1447.31 interval.

I anticipate US data to continue to outperform as the Citi economic surprise index is turning higher, and that might further reduce the need to cut interest rates and support the USD. However, other indicators such as the yield curve are still suggesting we could have a recession next year. With the long-term outlook in flux, it could keep gold prices range-bound. A test this week will be the ISM report and Friday’s NFP report.

Tactically, I suspect bullish traders will hold off with buying gold until the prices reach the $1381 to $1392.6 interval as the risk-reward ratio favors long positions there. If the price fails to trade above the $1381 level, the price might slide to the June 19 low of $1357.6.8Don’t miss a beat! Follow us on Twitter.

Written By: Alejandro Zambrano

Alejandro Zambrano combines extensive professional experience and a pragmatic attitude to trading, building clients’ understanding of the markets and the rationale behind investing. Zambrano was the Chief Market Strategist of the FCA regulated broker, Amana Capital. Prior to that, he was also the Head Analyst at FXCM’s London research desk. Interact with Alex via Twitter at @AlexFX00.