Gold catches a bid through the 10 and 20-hourly moving averages on FOMC announcement
- Gold rallies on FOMC decision and climbs through 10 and 21-hr SMAs to a high of $1,221.84/oz
- The FOMC has left the rate at between 1.75-2% which is unchanged.
- The FOMC was noting that economic growth rate is strong and that the employment rate has stayed low.
There is now a 91% probability that the Fed will raise rates at its September meeting. Gold has popped and stocks are plunging. The DJIA was already on its knees and deep in the red, currently -0.40% at the time of writing, but the S&P 500 has played catch up in the red now as well where it was previously holding up, but is now down -0.33% at the time of writing. Oil is also off hard, -1.98%.
Key notes from the statement (nothing on trade tariffs):
- The unemployment rate has 'stayed low' versus 'declined'.
- 12-month inflation 'remains near' 2% versus 'moved close to' 2%.
- Monetary policy stance remains accommodative.
- Job gains have been strong in recent months with the unemployment rate staying low.
- No changes in guidance or balance of risks.
- Household spending has 'grown strongly' versus spending 'has picked up' previously.
- Economic activity has been rising at a 'strong' rate versus 'solid' rate.
Meanwhile, Gold had been on the backfoot on the first day of August, ahead of the latest update on monetary policy from the Federal Reserve, which could affirm a regime of higher rates that may lift the U.S. dollar and dull appetite for bullion. The precious metal was falling away from the 200-hr SMA up at $1,224/oz and continuing its decline from the $1,228.52/oz level that meets the descending resistance line that was formed back on the 14th June at $1,309.26/oz. However, on the release of the monetary policy statement, the price of gold has broken through the 10-hr SMA at $1220 and now the 21-hr SMA at $1221 as well.
Gold levels
However, and overall, the technicals remains with a bearish bias on the wider scope, indicating that it will continue in the southerly trajectory. This is a strong bear trend, within correction territory (below $1226.61), and the price is over 10% lower since the start of this year where the price was up at $1,362.90/oz. The golden death cross played out for the bears and the trend is intact, (with the 50-D SMA moving average for gold prices is falling below its longer-term 200-D SMA moving average). A break back above $1,295 will the trend be neutralised and open a test of $1300/oz (psychological level) and $1,302/oz. RSI is still on the verge of entering oversold territory but has titled higher and away from 30. The next supports are located at $1,215 and then $1,211. Below there, $1,204/$1,195 are key.