Gold loses some shine as investors await FOMC meeting

THE precious metal eased off previously held gains amid strong US jobs data and profit-booking activities before the next Federal Open Market Committee meeting (July 30-31). Smaller rate cut expectations prompted a recovery in the US dollar whilst imposing mild headwinds for the yellow metal. Financial markets have maintained bets for a 25bps reduction in the US Federal Fund Rate. Persistent weakness in global PMIs and US trade protectionist policies look poised to remain supportive towards safe haven assets in the current term.

What should investors look out for in the longer term?

Shaky economic fundamentals along with US trade protectionism have prompted a dovish pivot by global central banks. Looser monetary policies by the US Federal Reserve look poised to spur gold prices forward as traders contemplate lower yields and looming US dollar weakness. The precious metal, as such, has illustrated higher upside potential amid rising economic uncertainties and accommodative monetary policy by the US central bank. All eyes will be on the July 30-31 US FOMC meeting as Fed policymakers set the tone for forward guidance in monetary policy (H2, 2019).

Technical Analysis for Spot Gold (XAUUSD)

The yellow metal softened from July 19 highs (US$1,452.00), though strong support was seen at key technical levels. Gold prices will have to stay above US$1,400.00 (key psychological level) and US$1,382.00 (38.2 per cent Fibonacci Retracement Level) to maintain bullish convictions for the current term.

Market bulls look poised to target the next main station of US$1,437.00 and US$1,452.00 (month-highs) for a continuation of the positive trend scenario. A successful breakout above US$1,452.00 will rally gold prices forward towards the next key resistance level of US$1,482.00.

Weekly Market Assessment: Mildly Bullish Key Resistance Level (1): 1,452.00 Key Resistance Level (2): 1,483.00 Key Support Level (1): 1,400.00 Key Support Level (2): 1,380.00