Gold: Off recent highs as buyers remain cautious ahead of FOMC, trade headlines
- Gold traders remain on sidelines ahead of key events.
- Recent political news reports have been mixed while doubts over the trade deal act accordingly.
- Final statements from Shanghai, Fed decision will be crucial to foresee near-term market direction.
Despite North Korea’s second in a week missile test, Gold prices remain under pressure around $1429 during early Wednesday.
The reason could be tension among global traders ahead of the key events like final announcements from the US-China trade discussions in Shanghai and monetary policy decisions by the US Federal Reserve.
The White House’s likely waiver of Iran sanctions and the US President Donald Trump’s latest tweets indicating no breakthrough in trade negotiations with China could also be considered as additional catalysts weighing on the prices.
It should also be noted that China’s current month official activity data have been mixed with the headline manufacturing gauge keeps being in the contraction region. However, Australia’s inflation data downsized expectations of another rate cut from the Aussie central bank.
The global risk barometer, 10-year treasury yield from the US, has been mostly unchanged around 2.06% during the Asian session.
While fewer market participants expect an upbeat announcement at the end of two-day talks between the US and China, the Federal Open Market Committee (FOMC) is most likely to announce 0.25% rate cut, the first since the financial crisis.
Technical Analysis
FXStreet Analyst Ross J Burland spots 20-day moving average as the support indicating the bullion’s strength:
Gold prices have stabilized above the 20-day moving average at 1415, now basing higher into the Federal Reserve outcome in the 1430s. The upside opportunities will play out on a weaker Dollar, depending on the Federal Reserve's statement, but bulls can target 1430/40 and 1450s key areas (a level on a Fed-induced spike which is within current daily ATR of $18.00). The 1480s are a clear target ahead of the 1500 round and psychological level. At this juncture, this is where the Fibo extensions can come in handy when analyzing beyond prior price ranges. On an extension, the Fib levels of April swing lows to recent highs to the upsideholds the 127.20% target around the psychological 1500 level. Meanwhile, a hawkish Fed cut could lead to a rally in the Buck which would bring back scope for a test of the 20-daily moving average, (then the 23.6% retracement is located at 1410), that guards 1373/76 zone meeting the 19th June spike correction lows.