IGI Securities Limited – Commodity News

Karachi, March 20, 2019 (PPI-OT): Gold

Technical

Gold markets gapped higher to kick off the yesterday session, as it continue to grind higher in a bit of an upward channel. The 50 day EMA underneath continues offer support, just as the $1300 level of course will attract a lot of attention as well. As long as it can stay above there, it seems the market is going to continue to grind higher, and if it can clear the $1310 level it could very well find this market reaching towards the $1325 level after that. Target resistance is seen near a downward sloping trend line that comes in near 1,345. The Federal Reserve being loose with its monetary policy will of course continue to help the gold markets, but if for some reason they sound more tight than people expect that over the next couple of days, that could send Gold right back down.

Highlights

Gold prices snapped three consecutive sessions of gains today as the dollar firmed

Gold is expected to get rise after ahead Fed’s monetary policy

The firm dollar and gains in equities are headwinds for gold today and currently the risk appetite is slightly high

A stronger dollar makes gold expensive for holders of other currencies

Gold is often used as a hedge against political and financial uncertainties.

Fundamentals

Gold prices dipped today, after posting gains in the previous three sessions, as the dollar gained ground ahead of an interest rate decision by the U.S Federal Reserve later in the day.

Spot gold was down about 0.1 percent at $1,304.85 per ounce, trading in a narrow $3 range. U.S gold futures dipped about 0.2 percent to $1,304.60 an ounce.

The dollar rose against most of its peers on reports of renewed tension in U.S-China trade negotiations. Investors since last year have favoured the dollar as a safe haven against the U.S-China trade dispute.

The Fed meeting will be followed by a decision on the interest rate and monetary policy statement in addition to the chairman of the federal Bank. Investors are also focusing on the monetary policy statement.

In the light of the adoption of the policy of patience to raise interest rates, members of the Federal Reserve sees signs of slowing in the growth of the US economy during the current year, but stressed that there is no risk of recession soon.

If the Fed is more dovish than expected, the dollar is likely to move lower and in turn support gold prices, while uncertainty surrounding Brexit has increased demand for safety.

The continued selling of the US currency, comes as cautions rise towards the uncertainty of the US economy growth path, coupled with the decline in yields of US Treasury long-term bonds, as the possibility of the Federal Reserve to cut interest rates this year becomes higher.

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