Gold strengthens over dovish testimony by Fed chief

DOVISH signals from US Federal Reserve chairman Jerome Powell bolstered bullion appeal as traders maintain bets for a quarter-basis point cut at the next Federal Open Market Committee (FOMC) meeting (July 30-31). The Fed chief spoke out on subdued economic momentum as US manufacturing Purchasing Managers' Indexes (PMIs) and inflation levels illustrate muted results (H1 2019).

The impact of trade protectionist policies has dimmed economic outlook significantly as business confidence levels remain feeble over disruptions in the global supply chain.

Rising market risks and looming US dollar weakness as such have buoyed gold prices significantly in the current term.

What should investors look out for in the longer term?

Financial markets have continued to price for a 25bps cut in the US Federal Funds Rate (July 19). A dovish pivot by US FOMC officials has imposed considerable headwinds on the greenback as traders bet on three quarter-basis point cuts for 2H 2019.

Persistent weakness in global economic data amid rising trade tensions has spurred safe haven demand substantially as risk appetites remain light-footed.

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With the US Fed chief affirming rate-cut expectations, gold prices continue to exhibit bullish biases over softer US dollar prospects and looming trade uncertainties.

Technical Analysis for spot gold (XAUUSD)

Gold prices reversed early losses as market bulls retook control at key support zone of US$1,382.00 (38.2 per cent Fibonacci Retracement Level). A successful breach at US$1,400.00 (Key Psychological Level) propelled price levels towards the next main station of US$1,425.00.

The bullish trend scenario will remain valid should gold prices stay above key technical levels of US$1,400.00 and US$1,380.00. An extension of bullish gains above US$1,425.00 will see market forces target key resistance level of US$1,440.00. A positive breakout above previous highs (US$1,440.00) will support bullish convictions towards US$1,483.00 (50 per cent Fibonacci Retracement Level) in the coming term.

Weekly Market Assessment: Mildly Bullish Key Resistance Level (1): 1,440.00 Key Resistance Level (2): 1,483.00 Key Support Level (1): 1,400.00 Key Support Level (2): 1,380.00