Gold notches 5-year highs over dovish signals by Fed policymakers
THE US Federal Reserve has signalled a strong dovish pivot on monetary policy guidance as Federal Open Market Committee officials noted lacklustre inflation and subdued economic momentum.
The central bank has turned increasingly accommodative as market risks elevate over looming economic and geopolitical uncertainties.
Traders have priced in aggressively for three rate cuts by the second half of 2019 as Fed Policymakers pledge to sustain economic expansionary activities.
Mounting tensions between the United States and Iran have bolstered safe haven appeal significantly as investors remain cautious over militaristic confrontation in the Middle East.
What should investors look out for in the longer term?
A shift in US monetary policy guidance has promulgated sharp bearish weakness on the US dollar. Escalating US-Iran tensions over tanker and drone attacks have sparked market fears over potential military action in the Gulf of Oman.
The precious metal looks poised to extend bullish gains as investors deliberate softer greenback prospects and heightened geopolitical risks.
Strong technical buying (swing-trading) and a series of short-covering activities might trigger sharp jumps in gold prices for the near term.
We remain cautious however on exceedingly bullish calls as a strong recovery in risk assets will exact considerable headwinds for the non-interest bearing asset.
Technical Analysis for Spot Gold (XAUUSD)
Gold prices rallied strongly as market bulls successfully breached key psychological level of US$1,400.00.
Should gold bulls consolidate gains above US$1,400.00, we expect for strong technical buying activities to power price levels towards US$1,415.00 and US$1,445.00 (61.8 per cent Fibonacci Retracement Level) in the near term.
Traders should take caution however on profit-taking activities as technical indicators (Stochastics) illustrate for overbought pricing levels.
Failure to sustain above US$1,400.00 will effect a bearish correction towards key trend line support of US$1,375.00.
Weekly Market Assessment: Mildly Bullish Key Resistance Level (1): 1,400.00 Key Resistance Level (2): 1,445.00 Key Support Level (1): 1,375.00 Key Support Level (2): 1,345.00
