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Will a dovish FED lead to a bullish yearly close for Gold?

October 30, 2019 09:00

Source: Economic Events 30 October 2019 - Admiral Markets' Forex Calendar

Today, all eyes are on the FED rate decision.

While a rate cut of 25 basis points is nearly completely priced in (currently the FED Watch Tool shows a likelihood of way over 90%), what's certainly of higher interest is the rhetoric in regards to the rate decision in December and the announced "Non-QE"-QE program.

In regards to the latter, the current plan is to buy US Treasuries for the next 8.5 months at a pace of 60 billion USD per month, and any hints at Wednesday's meeting that the FED could consider extending that program if there are no liquidity improvements could result in Gold taking on bullish momentum. This could lead Gold to recapture 1,500 USD, with US yields expected to push lower again.

If in addition to such a dovish rhetoric, speculations around another 25 basis point rate cut for the December meeting are taking on momentum again (currently the FED Watch Tool sees a surprisingly low likelihood of below 20% for such a rate cut), and the upcoming US economic releases, especially the ISM Manufacturing on Friday, could trigger further bullish momentum in Gold into the weekly close.

If the ISM data continues to trend lower and result in rising recession fears (for September the ISM Manufacturing dropped to 47.8, the steepest contraction in the manufacturing sector since June 2009), the yellow metal has a good and solid chance to go for an attack at the region around 1,520 USD.

In general and from a technical perspective, the advantage in Gold stays on the Long side above 1,380 USD and our mid-term target around 1,650/700 USD is still active.

And again: even a stint below the current October lows around 1,460 USD wouldn't darken the picture, but instead bring a potential mid-term long trigger around 1,440/450 USD into play:

Source: Admiral Markets MT5 with MT5SE Add-on Gold Daily chart (between 31 July 2018 to 29 October 2019). Accessed: 29 October 2019 at 10:00 PM GMT

Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2014, the value of Gold fell by 1.7%, in 2015, it fell by 10.4%, in 2016 it increased by 8.1%, in 2017 it increased by 13.1%, in 2018, it fell by 1.6%, meaning that after five years, it was up by 6.4%.

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