- Gold shoots to the VPOC of the recent range, a pullback could be in order despite Fed emergency cut.
- With per-trader positioning still overextended, a reversal in ETF holdings could continue to add pressure on gold prices.
Gold prices are back to the current range's point of control with a burst to life from the Federal Reserve's emergency rate cut of 50 basis points sending the yellow metal over 3.65% higher and US yields to record lows. At the time of writing, gold stands at $1,645.52 having travelled between a range of $1,585.30 and $1,649.33.
In an emergency meeting, the Fed cut interest rates by 50 basis points. This was followed by a press conference where Fed's chair, Jerome Powell, said the "outbreak has prompted significant moves in financial markets." Powell added, "In the weeks and months ahead we will continue to closely monitor developments and will act appropriately to support the economy."
As one would expect, US yields continue to plummet and the Fed funds rate is now in the 1-1.25% range but 2-year yields have fallen by 13 basis points to 0.774%, suggesting more is coming. This makes gold's safe-haven bid and returns appealing to investors as the coronavirus continues to play havoc elsewhere – for instance, following an initial spike, the S&P 500 is back into negative territory today.
Gold higher for 2020
TD Securities expects the Fed to "cut in March and April, which will continue to suppress global real-rates amid an asymmetric Fed reaction function — a theme that will continue to drive precious metals higher into 2020".
Gold levels
The analysts at TD also warned, however, "With per-trader positioning still overextended, a reversal in ETF holdings could continue to add pressure on gold prices." From a technical perspective, golds volume point of control of the Feb 24th highs to late Feb lows is located at $1,647 and could be ripe for a shortlived downside correction opportunity. The 23.6% Fibo is located at $1,628.61 as the edge of the volume value area of the same range. This is an old resistance of May - Aug 2012 and a support of Dec 2012-Jan 2013 which ultimately gave way to a prolonged downtrend into 2016 lows. More recently, it has acted as a support on the 25th and 26h Feb.
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD struggles to hold above 1.0400 as mood sours
EUR/USD stays on the back foot and trades slightly below 1.0400 following the earlier recovery attempt. In the absence of high-tier data releases, the negative shift seen in risk mood helps the US Dollar gather strength and forces the pair to stretch lower.
GBP/USD declines toward 1.2500 on renewed USD strength
GBP/USD loses its traction and declines to the 1.2500 area in the second half of the day on Monday. The US Dollar (USD) benefits from safe-haven flows and weighs on the pair as investors await US Consumer Confidence data for December.
Gold drops below $2,620 as US bond yields edge higher
After starting the week in a quiet manner, Gold comes under bearish pressure and retreats below $2,620. The benchmark 10-year US Treasury bond yield stays in positive territory above 4.5%, making it difficult for XAU/USD gain traction.
Bitcoin fails to recover as Metaplanet buys the dip
Bitcoin hovers around $95,000 on Monday after losing the progress made during Friday’s relief rally. The largest cryptocurrency hit a new all-time high at $108,353 on Tuesday but this was followed by a steep correction after the US Fed signaled fewer interest-rate cuts than previously anticipated for 2025.
Bank of England stays on hold, but a dovish front is building
Bank of England rates were maintained at 4.75% today, in line with expectations. However, the 6-3 vote split sent a moderately dovish signal to markets, prompting some dovish repricing and a weaker pound. We remain more dovish than market pricing for 2025.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.