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FED rate cut on Wednesday fully priced in. Gold about to drop?

July 31, 2019 10:00

Source: Economic Events 31 July 2019 - Admiral Markets' Forex Calendar

Today, we want to focus on the FED rate decision and its potential impact on Gold.

After the short push to new yearly highs in Gold after the comments from NY president Williams, which resulted in a spike in market expectations of a 50 basis point cut, these expectations stabilised over the past few days with markets currently expecting a 25 basis point rate cut from the FED.

What's potentially interesting now is that the market seems to have nearly completely priced in any dovish remarks and speculation around monetary stimulus from the US central bank.

With that in mind, the upside potential in the yellow metal seems limited, having already priced out the chances of four rate cuts in 2019 (which currently ranks at slightly below 20% according to the FED Watch Tool), especially if the upcoming US economy data sets on Thursday (ISM Manufacturing) and Friday (Non-Farm Payrolls) report any positive data.

That said, price action wise, chances seem high that Gold will see a stint towards and probably below 1,400 USD with a first target around 1,380 USD.

But even if we break below 1,380 USD in the second half of the trading week, we maintain our mid-term bullish Gold bias and consider the region around 1,360/365 as a potential mid-term long-trigger with a first target to be found around 1,480/490 USD.

Source: Admiral Markets MT5 with MT5SE Add-on Gold Daily chart (between 25 April 2018 to 30 July 2019). Accessed: 30 July 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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