Gold eases bullish gains over US monetary policy uncertainties

HEIGHTENED market optimism on preparations for a fresh wave of economic stimulus by global central banks raised risk appetites for the current term. Growing dissent on further monetary policy easing between Fed policymakers bolstered greenback strength whilst placing a damper on gold prices.

Financial markets have priced for a 25bps reduction in borrowing costs at the next Federal Open Market Committee meeting (Sept 17-18) as traders scale back on larger cuts amid hawkish comments by US Fed officials. A recovery in global risk assets along with US monetary policy uncertainties dented bullion appeal this week as investors booked profits ahead of the Jackson Hole Symposium.

What should investors look out for in the longer term?

Fed chairman Jerome Powell's speech at the Jackson Hole summit will remain a key focus as investors seek forward guidance on US monetary policy trajectory (2H 2019). Subdued global economic momentum and a prolonged Sino-US trade dispute have kept financial traders geared towards a quarter percentage-point reduction on Sept 19.

Though we remain optimistic on safe haven appeal (slower global growth and accommodative US monetary policy), a hawkish stance by the Fed chief on US interest rates will erode bullish gains in the yellow metal for the near term.

Technical Analysis for Spot Gold (XAUUSD)

Strong resistance at US$1,510.00 prevented an extension of the bullish wave whilst spurring negative trades for gold prices. The precious metal struggled to hold above key psychological level of US$1,500.00 amid prevailing bearish bias in the current term. Failure to hold above the key technical level of US$1,480.00 (38.2 per cent Fibonacci Retracement Level) will trigger a sharp bearish correction towards key trend line support of US$1,455.00. Gold prices must establish a bullish break above US$1,510.00 for a resumption of the uptrend towards the next main station of US$1,535.00 (2019 highs).

Weekly Market Assessment:

Range-Bound

Key Resistance Level (1): US$1,535.00

Key Resistance Level (2): US$1,5510.00

Key Support Level (1): US$1,480.00

Key Support Level (2): US$1,455.00