Gold prices suffered a sharp selloff in the past few days, thanks to the Fed’s plans to carry on with the taper for the next meetings and Fed Chairperson Yellen’s hint that the central bank might start hiking rates around six months after asset purchases end. Bear in mind that gold is usually treated as a hedge against the dollar and that positive interest rate expectations are currently giving the dollar support for now.
Do take note though that some FOMC officials have different views as Yellen, saying that interest rates will be kept low for an extended period. Even non-voting members such as Fed official Williams expressed an inclination for a longer period of easy monetary policy from the Federal Reserve.
This explains why gold has managed to hold its head above the 1300.00 major psychological support level, stopping short at a low of 1308.05 this week. A bounce might be in the cards, possibly until the closest resistance level but it remains to be seen whether this would just be a correction or not.
Gold Price Forecast
A correction could happen until the Fibonacci retracement levels marked on the 1-hour time frame, or possibly until the previous swing low to the 1320.00 area. If the selloff resumes at these points, gold prices could test the 1300.00 mark or possibly make new lows.
For this scenario to take place though, it would take a very strong economic catalyst or particularly a much higher than expected US economic figure. In today’s schedule, on the CB consumer confidence and new home sales reports are on tap. CB consumer confidence might show an increase in optimism but new home sales are likely to show a bit of weakness.
Weaker than expected data from the US could renew demand for gold and push prices back up, as it would indicate that the Fed is still miles away from actually tightening monetary policy.
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