Gold prices (XAUUSD) remain stable, and the trend continues upwards despite the Federal Reserve adopting a neutral tone at last evening’s interest rate meeting.
The trend of gold prices will remain upwards as long as the price trades above the August 13 low of 1479.79, and the price could reach the yesterday’s high of $1512, followed by the August 25 high at $1554.96. However, on gold prices trading below the August 13 low, the price could fall until it reaches August 2 high at $1448. Between the August 2 high and the August 1 low, I anticipate that long-term traders will try to rebuild their bullish exposure.
The FOMC, a committee within the Federal Reserve that sets interest rates and overall monetary policy, cut interest rates at last evening’s rate meeting as they trade uncertainty has risen, and the world economic growth has slowed. Despite the rate cut, the dollar initially gained and sent gold prices lower as the central bank is not as committed to reducing interest rates as the market is projecting.
Interest rate traders are projecting that by the April 29, 2020 rate meeting, the Fed will have reduced rates three times to 100-125 with a 43% probability. However, the central bank itself is anticipating that they will leave interest rates unchanged until the end of 2020.
Overall, the market has been more dovish than the Federal Reserve over the last few months, and so far, the market has needed to adjust their expectations and not the Federal Reserve. Stock markets are also signaling that everything is ok in the US economy and world, as the S&P 500 trades just below its all-time high. And that is a dilemma for gold buyers.
If the world economy is as good as stock markets and the Federal Reserve perceives then is there a need for gold prices to trade at the current levels? Or could it be that gold trades are focusing on something entirely different like the US and Iran situation? If they are, then they are more worried that crude oil traders, as crude oil prices have lost most of their gains following the news of the drone attacks on Saudi Arabia oil production facilities.