It is a common belief that Gold is the ultimate hedge against inflation and that belief helped gold to gain $138 within less than a year against USD as US CPI numbers increased gradually in 2018. Another contributing factor on the gold bullishness must have been the aggressive rate hike policies adopted by US Fed. The rate went from near zero to 2.5 basis points within a span for 2.5 years.
But in the recent speech by the FED chairman Powell, he started to adopt a softer tone toward further rate hikes and indicated there would be no more rate hikes for the first quarter of 2019. As a result, traders are now positioning themselves on the upcoming potential bullishness of US dollar. At the same time, the record US government shutdown and the fiasco surrounding Brexit have brought more uncertainty to the market, and so we may see USD favoured by traders.
From the technical point of view, the bullish momentum seems to have slowed down for the past 2 weeks as after it tested a strong resistance near $1,300. The $1,300 price level is a strong psychological level. So, we saw consolidation around $1,290 level for nearly two weeks and it ended with a strong bearish engulfing candle on the last Friday. It could be a strong indicator for the gold price to slide further for now till the price is met with strong bullish buy up at much lower level, in the near future.
Take note of the strong level such as $1,260 and $1,240 which could act as decent supports while $1,200 will be a key level to watch.
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In January the Fed needed to put the Taper Genie back in the bottle; now they need to convince the short end crew to back off repricing the Fed Funds strip