Gold Getting a Boost as Fed Expresses Concern

  • As the Fed indicate rate cuts are coming gold will keep rising over the summer 
  • There is a disconnect between asset price inflation and the real economy 
  • Earnings will be flat or disappointing and too much debt has little or negative yield 

I last looked at Gold on May 26, 2019 when I called for buying the metal to target $1304/Troy Oz. The stop was set at $1250. Since that time the first target was reached on May 31. The stop was not activated as the low since May 26 as $1273.90. 

I believe gold is setting up for a solid upside breakout after reaching the first target and barely looking back. 

The market for gold closed on Friday at $1417.65/Troy Oz a gain of $10.95 on the day or 0.78%. The chart shows that gold has shown a clear signature of rotation in a gently rising impulsive channel over the past month. One can see the mid-channel line that has contained the gold price since July 10 and yet across the entire technical outlook horizon gold is booked as a “STRONG BUY”. 

Gold Futures

Source: , Spotlight Ideas 

I have overlaid on the price range a Fibonacci extension and contend that buying gold in the low $1400’s is an excellent opportunity as I am now looking for gains to break above $1500 with the prospect of more to come after that. Market Comment Gold Getting A Boost As Fed Expresses Concern July 14th, 2019 

Why should this be the case? In the past week the Chair of the Federal Reserve, Jay Powell appeared to shift the debate from will the Fed cut rates to one of when and by how much will Fed Funds be reduced from the current level of 2.50%. 

The Fed held the target range for the Fed Funds rate at 2.25-2.50% but dropped a promise to be “patient” in adjusting rates and signalled possible rate cuts of as much as 50 bps later this year. 

The policymakers left economic projections for growth and unemployment mostly unchanged, but they will have noted headline inflation was forecast at just 1.5% for the year, down from the 1.8% projected in March. 

This week saw Fed Funds Futures imply 75bps of easing in Fed Funds by early 2020. While 75 basis points may seem aggressive, if the Fed initiates a rate-cutting policy we should prepare for more. 

I accept that when the unemployment rate is at 50-year lows calling for three 25 bps rate cuts is a tough chew, however, please remember that the Dow over 27,000 and the S&P 500 over 3000 represents asset price inflation…not real economy inflation. GDP growth has begun to slow only after a period of above-average growth. 

So, the Fed is looking ahead and is publicly expressing concerns based on slowing global growth, trade wars, and diminishing returns to a fiscal stimulus that lifted the economy since 2017. 

The central banks are worried, rates are coming down, this will benefit the attraction of gold as equity earnings disappoint and good quality has little or negative yield. 


Buy now target 1510 

Stop at 1380 

Comments on this analysis

Your email address will not be published. Required fields are marked *

Latest News

The Forex Zone
The Forex Zone – Erratic activity as trade tensions send mixed signals

Here in The Forex Zone we review the day trade views for most the major Forex currencies in a volatile week for FX markets amid ongoing trade concerns and inverting yield curves. Again, we spotlight the significant levels to watch and the directional biases for the key Forex pairs; EURUSD, GBPUSD, USDCAD, AUDUSD, NZDUSD and … Continued

Dax index monthly
Dax weekly report 20190815

Dax retests & holds the low so far at 11435. A break lower targets 11400/380, 11320/300 & below 11280 risks a slide as far as support at 11180/170. Bulls need a double bottom at 11435/425 to trigger a recovery targeting 11485/495 & first resistance at 11520/530. If we continue higher look for 11580/590 & minor … Continued

4 Hour EURO STOXX 50 Future Chart
US yield curve inversion sees global stocks resume bear theme

An inversion of the US Treasury 2-10yr yield curve on Wednesday was the first such occurrence since 2007. This sent negative shock waves through global financial markets, as an inversion of this segment of the yield curve is often a signal of a future resurrection in the US. Furthermore, the US 30yr Bond moved to … Continued

AUDNZD 1 hour chart 2019-08-15
AUDNZD and EURNZD Both Stopping for A Pullback!

AUDNZD unfolded five legs within wave a, which can be part of a bigger, bullish reversal. Completed five legs within a trend indicate a three-wave retracement to follow, which is already the case on AUDNZD; an a)-b)-c) pullback to around 1.043/1.039 region, where bulls may again take over. A later rise in impulsive fashion would … Continued

Forex Brokers in your location