Gold Price Talking Points

Upcoming comments from Federal Reserve officials may influence gold prices as the trade truce between the US and China comes to an end.

Fundamental Forecast for Gold: Bullish

The price of gold climbed to a fresh weekly high ($1449) as President Donald Trump announced “the US will start, on September 1st, putting a small additional tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China,” and the growing threat of a trade war may push market participants to find an alternative to fiat currencies amid the weakening outlook for global growth.

It remains to be seen if China will respond to the new US tariffs as the region faces the slowest pace of growth in nearly three decades, but the weakening outlook for global growth may push the Federal Reserve to further insulate the economy amid “the downside risks from weak global growth and trade policy uncertainty.”

In fact, Fed Fund futures now reflect a greater than 80% probability for another 25bp reduction at the next interest rate decision on September 19, and the Federal Open Market Committee (FOMC) may continue to reverse the four rate hikes from 2018 especially as President Trump favors a “a lengthy and aggressive rate-cutting cycle.”

In turn, fresh comments from St. Louis Fed President James Bullard and Chicago Fed President Charles Evans, both 2019-voting members on the FOMC, may influence gold prices over the coming days, and a batch of dovish comments may push investors to hedge against fiat currencies as the central bank adjusts the path for the benchmark interest rate.

With that said, current market conditions may keep the price of bullion afloat as there appears to be a flight to safety.

Gold Price Daily Chart

Keep in mind, the broader outlook for gold prices remain constructive as both price and the Relative Strength Index (RSI) break out of the bearish trends from earlier this year.

Moreover, the string of failed attempts to close below the $1402 (78.6% expansion) region keeps the topside targets on the radar as the price for bullion breaks out of a triangle/wedge formation.

Waiting for a close above the Fibonacci overlap around $1444 (161.8% expansion) to $1448 (38.2% retracement) to spur a more meaningful run at $1457 (100% expansion) hurdle, with the next area of interest comes in around $1467 (50% expansion) followed by the $1488 (61.8% expansion) region.

Additional Trading Resources

For more in-depth analysis, check out the 3Q 2019 Forecast for Gold

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--- Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong.