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Gold Prices Hold Stable Despite Less Dovish Fed

Gold prices have held up relatively well in the last week despite that the interest rate markets now having priced out a 50bps rate cut at the Federal Reserve September 18 meeting, from pricing in a 50bps rate cut with a 31.5% probability just one week ago.

Economic slowdown across the world and trade wars could explain why investors prefer the perceived safety of the yellow metal. Later today at 13:30 BST, the US Markit PMI figures for August are due. Economists are projecting that the PMI for manufacturing rose to 50.5 from 50.4, while the service index declined to 52.8 from 53. If the figures beat the estimates, we could see gold prices come under pressure, while lower than expected figures might send gold prices higher.

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Technically, the gold price trend remains upwards and as long as the price trades above the August 13 low of $1479.40 the price might revisit its 2019 high of $1534.93. However, the August 13 low is a fragile support level, and the risk-reward ratio for fresh position around the current levels is low. Instead, I suspect long-term and more capitalized traders will focus on the July 17 low at $1399.29, this level is more prominent and more stable. If the long-term traders are to decide, then the gold price might slide to the $1429-$1455 interval before they step in and support the price with stops loss orders below $1399. The 1455 level is the 50% correction level of the bull-leg that started from the July 1 low of $1381.29 and ended with the current 2019 high at $1534.93.Download our latest quarterly market outlook for our longer-term trade ideas.

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