Jerome Powell’s comments on a possible interest rate reduction at the next FOMC meetings provoked a boom in gold prices, which today updated trading highs from 2014. At the time of writing, gold showed an increase of more than 2.8%.
This market reaction is due to the fact that lowering interest rates in the United States will lead to a weakening of the American currency, in which the yellow metal is denominated, and a decrease in the yield of American treasuries, making gold a more attractive asset for investment.
In his speech, Powell noted that the arguments in favor of more stimulating monetary policy have intensified, so the regulator will closely monitor US economic statistics, which in the coming months will play a key role in determining the future monetary policy of the Fed. Therefore, today it is worth paying attention to the publication of data on indices of the Federal Reserve Bank of Philadelphia. Experts expect a decrease in the rate of production activity, which may increase the pressure on the dollar and support the growth of gold.
On the chart, the price easily overcame resistance at 1360.00 and now trading takes place in the area of 1387.00. After such a strong growth of quotations, we can expect the development of a rolling back movement already from current levels. The immediate target will be a mark of 1376.00, but in the case of its breakdown, we should not exclude a fall in quotations to 1360.00.
Resistance Levels: 1387.00, 1395.00, 1400.00;
Support levels: 1376.00, 1360.00, 1332.00.
The main scenario is a correction to 1376.00.
An alternative scenario - consolidation above 1387.00 and an increase to 1400.00.
A very positive news background has been formed on the market, but after updating the perennial highs, many investors can start fixing long positions profits in gold, so we’ll consider selling the instrument with very moderate risks from 1387.00 within a day.