Gold surges to 8-day high on aftershocks of Powell’s Testimony, trade/political pessimism
|- The Fed Chair’s dovish Testimony, supported by the FOMC Minutes, initial triggered Gold’s rally.
- The yellow metal carries the strength amid pessimism surrounding the US-China trade deal and the US-Iran political tussle.
While dovish results of the Fed Chair’s Testimony and the FOMC Minutes initially triggered the markets’ run towards Gold, doubts over the US-China trade deal and likely escalation of geopolitical risk between the US and Iran added strength to the bullion buying as it takes the bids to $1424.86 during early Thursday.
In his semi-annual Testimony before the House Financial Services Committee, the US Federal Reserve Chairman Jerome Powell reiterated the downside risk to inflation while asserting a 25 basis point (bp) Fed rate cut. Following that, Minutes statement of the latest monetary policy meeting by the US Federal Open Market Committee (FOMC) also revealed that there are a few policymakers who are highly in favors more rate cuts.
As a result, the US Dollar (USD) registered across the board weakness, which in turn pushed buyers towards Gold that generally has a negative correlation with the greenback.
Stretching the moves are the latest round of news releases from the US and China that doubt the US President Donald Trump’s highly optimistic comments about the US-China trade truce. Additionally, rumors surrounding the US readying for an air strike in Syria, over Iranian targets, offered extra pace to risk-averse traders.
Global key risk gauge, 10-year treasury yield from the US are on their way to losing 2 bps to 2.044% by the press time.
Moving on, the second day of the US Fed Chair’s Testimony and the US Consumer Price Index (CPI) will be on the spotlight for fresh clues. Even if Mr. Powell isn’t expected to deviate from the latest comments a slight modification into the dovish comments, coupled with upbeat inflation numbers, can trigger the USD recovery.
Technical Analysis
FXStreet Analyst Ross J. Burland spots bullish candlestick formations to highlight $1440 resistance:
Gold prices have found higher grounds following a drop in the Dollar on expectations of the Fed cutting rates. The DXY index was trading 0.4% lower Wednesday at 97.08. Gold prices had left a bullish pin bar on the charts. Overnight, the bullish engulfing candlestick was left and has been cementing a bullish outlook based on the price action. The 20-day moving average supports but on a break lower, bears would target a 50% retracement of the April swing lows to late June swing highs around 1352. On the upside, however, bulls broke the 1410 level and marked 1418 tops. Bulls can look ahead to the 1440 key resistance which makes way for a continuation to the May 2012 lows at 1527.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.