Gold consolidates at key resistance ahead of anticipated tariff announcements

The price of gold spiked on the Federal Reserve’s interest rate decision and the Committee’s changes to its statement along with a Fed Chair Powell's dovish statement. 

 Gold is currently trading at $1,475.05 around the session highs having travelled from a low of $1462 overnight. The Fed outcome was initially a little more hawkish than expected, especially considering most Fed observers have been looking for a rate hike sometime in 2020, most likely in the springtime. Instead, the dots say different and that is where the market attention had been until Fed Chair Powell came on the scene. 

Chair Powell's repeat of the "We've just touched 2% core inflation to pick one measure, & then we've fallen back. So, I think we would need to see a really significant move up in inflation that's persistent before we would even consider raising rates to address inflation concerns," from the October 30 FOMC press conference in today's sounded-off the potential for financial conditions to stay accommodative for many years to come, which helped bolster sentiment on Wall Street and took some wind out of the sails of precious metals, despite a drop in the US dollar and yields. 

Key takeaways from FOMC statement and projections

• The market has priced in virtually no chance of rate move through February.
• IOER 1.55% vs 1.55% prior.
• Fed drops language about ‘uncertainties about this outlook remain’.
• Vote was unanimous.
• “The Committee will continue to monitor the implications of incoming information for the economic outlook, including global developments and muted inflation pressures, as it assesses the appropriate path of the target range for the federal funds rate”.
• No changes in the economic outlook paragraph.
• Says “the current stance of monetary policy is appropriate”.
• Leaves forecasts for GDP and inflation unchanged, lowers unemployment.
• Median forecast is for one rate hike in 2021 and one in 2022.

Key risks for gold traders

Meanwhile, trade wars and an expected announcement from the US President Donald Trump before the weekend is likely keeping traders to the sidelines and gold prices elevated. 

Focus is on whether Trump will announce that scheduled tariffs on Chinese imports will go ahead or not on the 15th of December. This is a major theme for risk of markets including precious metals. In recent trade, Reuters sources say that US President Donald Trump is likely to meet with top trade advisers on Thursday to discuss Dec. 15 tariffs on Chinese goods.

More on the risks and implications associated with tariff and trade wars here

At the same time, Brexit is another factor which can be supportive of precious metals. UK elections on Thursday coming up and the odds of a conservative victory of Labout have narrowed considerably over the past week which is pointing to the possibility of a hung UK parliament – a supportive factor for precious metals. More on that, here: UK Election Preview: GBP bulls to hold their horses

Gold levels

Bulls are tackling the 200 4-hour moving average, having pierced it overnight but settling back below it in early Asia, located around the highs of the day, 1475. This is also a 23.6% Fibonacci retracement level, taking into consideration the YTD highs and recent swing lows. 1485 and prior highs guard 1490 as the 38.2% Fibo od said range and the mean reversion comes in at 1503 – another familiar resistance level. On the downside, the 6h Dec lows comes in at 1458.77 as a key target.