Gold awaits Fed movements

Financial and commodity markets analytics

Gold is under further pressure today after its strong rally in June and according to some analysts the future direction of the price is likely to be dictated by trade deals and political movements connected with the worlds largest economy.

After jumping by more than $100 in the previous month, the price has now pulled back $30 over the past 6 days and todays minutes meeting from the US Federal is likely to create some major volatility.

“Gold's sharp repricing in June, in both US$ terms and versus other fiat currencies, was a statement breakout; it highlighted a macro regime shift and proved that it has adapted to be a geopolitical hedge, a trade policy hedge, a rate cut hedge, and a currency war hedge,” said Scotiabank commodity strategist Nicky Shiels.

The market is divided on how the Fed will present the US economy later today and  

Investors will be looking for clues on whether the Central Bank will cut rates later this month, as it is widely expected, or if they plan to keep rates on hold because economy is strong enough to maintain current monetary policy.

If they give the signal that rates will remain unchanged gold is likely to surge higher and break through the recent resistance point of $1,440

"The combination of the dovish commitments by global central banks against a backdrop of increasingly more unpredictable and complex trade & geopolitics and softer growth, especially in the manufacturing sector, has ensured $1,350 is the new hard floor; further upside through the $ 1,440 ceiling is now increasingly dependent on U.S. politics/geopolitics and trade, in addition to data, especially if the larger underweight generalist investor subscribes to the structural long gold story," Shiels added.


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