Gold Got Just What The Dr. Ordered
Today’s Spotlight Market
Yesterday’s FOMC minutes were exactly what Gold bulls were hoping for, which gave prices a boost. The question is whether or not the Gold market will be able to sustain the rally or if it will simply fizzle out. Yesterday’s minutes show the Federal Reserve essentially completing the transition between hawkish and dovish attitudes. Two key talking points that suggest the Fed will continue to be very lax with their policy are inflation and the labor market. The talk of inflation remaining low for the foreseeable future and the mention of?underutilization in the labor market build the case to keep rates low. It was as if the central bank sought to downplay the positive job reports over recent months.
Fundamentals
The direction of the US Dollar in the near-term may either stymie a potential rebound in prices or add fuel to the fire. The greenback did not sharply fall back on the FOMC minutes, which was somewhat surprising. The minutes could be seen as Dollar negative, especially since the committee members specifically voiced their concern over a stronger greenback. The state of the European economy could prevent a large scale sell-off in the US Dollar, as the ECB will likely be much more aggressive with its monetary policy than the Fed.? The Fed, on the other hand, may simply be content with having the bond-buying program come to an end and keeping interest rates low. Aggressive action from the ECB and softer Chinese economic activity could keep the US Dollar from retracing significantly, which may limit the upside in Gold.
Technical Notes – View Today’s Chart
Turning to the chart, we see the December Gold Contract bouncing back strongly after briefly trading below the 1200 level.? In addition to running into technical support between 1175 and 1200, prices had been oversold, which helped spark the reversal.? Prices may encounter resistance near the 1240 level.? If prices are able to gain their footing above the 1240 mark, it may result in further buying interest.
——————————————————————————————
Disclaimers
This article is provided for informational purposes only. No statement in this article should be construed as a recommendation to buy or sell a security or to provide investment advice. The content provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy and completeness. optionsXpress makes every effort to provide timely information to its recipients but cannot guarantee specific delivery times due to factors beyond our control. Derivatives involve substantial risk and are not appropriate for all investors. Please read the?“Disclosure Statement for Futures and Options”?prior to investing in futures or options. For investments using a straddle or strangle options strategy the potential loss is unlimited. Multi-leg option strategies are subject to multiple commissions. Profits may be eroded by the commission expended to open and close the positions and?other risks?apply.