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Gold to Retain Inverse Relationship to USD on Dovish Fed Guidance

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Gold Price chart

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Gold Talking Points

The price of gold pulls back from the monthly high ($1933) as the US Dollar appreciates against most of its major counterparts, and the precious metal may continue to exhibit an inverse relationship with the Greenback as the Federal Reserve vows to “increase its holdings of Treasury securities and agency MBS (mortgage-backed securities) at least at the current pace.”

Fundamental Forecast for Gold: Neutral

The price of gold appears to be stuck in the September range as US lawmaker struggle to pass another round of fiscal stimulus, and the deadlock in Congress may continue to drag on risk appetite as it heightens the risk for a protracted recovery.

Investor confidence may continue to abate as the Federal Open Market Committee (FOMC) appears to be on track to retain a wait-and-see approach at the next interest rate decision on November 5, and it seems as though Chairman Jerome Powell and Co. will rely on its current tools to support the US economy as most Fed officials judged that “yield caps and targets would likely provide only modest benefits in the current environment.

In turn, the Fed may continue to adjust its non-standard measures as Cleveland Fed President Loretta Mester, a 2020 voting-member on the FOMC, insists that the committee could “shift to longer-term Treasuries, as we did during the Great Recession,” and the dovish forward guidance may heighten the appeal of gold as an alternative to fiat currencies as the Fed’s balance sheet increases for the second week.

FED Balance Sheet

The most recent update showed the Fed’s balance sheet widening to $7.151 trillion from $7.0.75 trillion in the week of October 7, and the Fed’s dovish forward guidance may keep the price of gold afloat as Chairman Powell and Co. remain “committed to using the Federal Reserve’s full range of tools in order to support the U.S. economy.”

Looking ahead, New York Fed President John Williams and Governor Randal Quarles may strike a similar tone as the both of the permanent voting members on the FOMC are scheduled to speak over the coming days, and a slew of dovish comments may keep current market trends in place as the central bank plans to unveil a “more explicit outcome-based forward guidance.”

With that said, the price of gold may continue to exhibit an inverse relationship with the US Dollar as the Fed’s balance sheet approaches the peak from June, and dovish remarks from FOMC officials may keep the precious metal afloat as it helps to restore investor confidence.

— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong





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Pound Holds Steady on Brexit Deal Optimism By Investing.com

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© Reuters.

By Yasin Ebrahim

Investing.com – The pound held steady against the dollar on Monday, shrugging off renewed demand for the safe-haven greenback on expectations the U.K. and EU will eventually reach a Brexit deal after both sides agreed to push out the deadline to reach a consensus. 

fell 0.13% to $1.3024.

Brexit talks, which resumed last Thursday, were extended to Wednesday, when EU Brexit negotiator Michel Barnier is expected to attempt to bridge some of the divide between the U.K. and EU.

Ahead of the talks, Barnier’s effort to clinch a deal could receive a boost on hopes German Chancellor Angela Merkel may be able persuade French President Emmanuel Macron to ease his stance on the key sticking point of fishing rights.

Britain has stressed that it prefers to take control over access to its waters, when the Brexit transition period ends. Macron, however, fears that a softer stance on fisheries could see French fishermen sacrificed.

The optimism on progress this week had been tempered somewhat following reports the U.K. is waiting until after the U.S. election to reveal its negotiation strategy as a Joe Biden victory could weaken Britain’s negotiation stance. Biden had previously stressed that a U.K.-U.S. deal would depend on Britain securing a deal with the EU.

British Prime Minister Boris Johnson, however, said Brexit and the U.S. election result were “entirely separate,” according to U.K. media reports.  

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Markets Week Ahead: Dow Jones, US Dollar, Stimulus, GBP, Brexit, EUR, ECB, JPY, BoJ

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Global market sentiment remains fragile heading into a busy week. The Dow Jones and US Dollar eye ongoing fiscal stimulus talks as the election nears. GBP/USD remains glued on Brexit negotiations. …



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XAUUSD Coils Ahead of Next Big Break

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Gold Price Forecast Talking Points:

  • Gold prices remain in a falling wedge pattern that’s been building for more than two months.
  • Ahead of this recent digestion, Gold prices were breaking out with aggression, setting a fresh all-time-high in early-August. Are bulls waiting to drive that next break?
  • The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.

Last week saw Gold prices tease a bullish breakout. But, buyers stepped back before a re-test of the prior October high and, so far, Gold prices have continued in the digestion backdrop that’s become commonplace over the past two months.

As looked at last week, Gold prices remain in a falling wedge pattern after the bullish breakout drove through the August open. This isn’t the first time that Gold prices have formed a falling wedge during this recent bullish cycle, as similar scenarios presented itself in Feb-May of last year and then again from September-December. Such formations will often be approached with the aim of bullish breakouts, begging the question as to whether or when buyers might be ready to resume the bigger picture trend in the yellow metal.

Gold Forecast

Gold Forecast

Recommended by James Stanley

Download our fresh Q4 Gold Forecast

To learn more about falling wedges, check out our DailyFX Education section.

Gold Daily Price Chart

Gold Daily Price Chart

Chart prepared by James Stanley; Gold on Tradingview

Gold – Deeper Support Potential

On a shorter-term basis, there could be scope for a deeper pullback while that longer-term wedge remains in-play. Price action in Gold appears to be slipping below the bottom-side of the 1900-1920 zone, and underneath price action is another area of possible support running from 1859-1871. This zone is what helped to catch the low in early-August, and came back into play in late-September. Prices in Gold could dip down to this zone while still remaining above the September swing-low; setting the stage for another run at resistances of 1900, 1920 and eventually 1933 (the October swing-high).

Top Trading Opportunities in 2020

Top Trading Opportunities in 2020

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Get Your Free Top Trading Opportunities Forecast

Gold Four-Hour Price Chart

Gold Four Hour Price Chart

Chart prepared by James Stanley; Gold on Tradingview

— Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX





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