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Gold poised to snap 4-day rally as metal hits a wall at around $1,370

Gold futures retreated on Monday, after a multiday rally as bullion, which has benefited from concerns about international trade clashes and a weakening global economy. The yellow metal for August delivery fell $7.50, or 0.6%, to $1,337, after closing Friday action wit a weekly loss of 0.1% based on the most-active contract prices as of June 7, FactSet data show. Prices on Friday had climbed to as high as $1,362.20, the highest since April 2018. Some commodity strategists say the precious...

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Fed Meeting Will Not Be The Spark To Push Gold Prices Higher - Analysts
Monday, 18 March 2019 15:30 WIB | GOLD CORNER |Gold OutlookGold Corner

Once again the gold market is eking out a weekly gain as prices trade around the critical psychological level of $1,300 an ounce. However, according to some analyst, the market lacks a catalyst to push prices to last month's 10-month high.

Although down from its highs, the market is still preparing to the week with most gains last week, with April gold futures last traded at $1,302 an ounce, up 0.21% from the previous week.

Ole Hansen, head of commodity strategy at Saxo Bank said that Thursday's 1% decline shows that the market is lacking conviction for higher prices. He added that resilience in equity markets is making gold a less attractive alternative for investors. The S&P 500 has broken above the psychological level at 2,800, last trading at 2828 points, up 3% from the previous week.

"Right now there appears to be no major need for an insurance policy so investors are shunning gold and turning to equities," he said. "I think there is growing frustration among gold investors and that is weighing on prices."

The question now on many market players' minds is what will be the catalyst to drive gold; according to some analysts anyone expecting a dovish Fed to be the spark to ignite a rally could be sorely disappointed.

It's All About The Fed

Once again all eyes will be on the Federal Reserve as it holds its monetary policy meeting this week and along with its interest rate decision will release updated economic projections. Economists are also expecting the central bank to unveil its plan to top its balance sheet reduction program.

"The median growth projection looks certain to be revised down," said economists at Capital Economics.

However, according to some analysts, these expectations are already baked into the market.

"I think the Fed pause story is largely played out," said Ryan McKay, commodity strategist with TD Securities. "Ultimately, if gold is going to go higher we need to see weaker U.S. data. The U.S. economy still appears strong compared to the rest of the world and that is keeping the U.S. dollar bid."

Although the central bank is expected to downgrade their growth and interest rate forecasts, Jasper Lawler, head of research at London Capital Group, said that he does not expect the Federal Reserve to be anywhere near dovish as the European Central Bank was two weeks ago when it surprise markets with a shift in its forward guidance, not expecting to see any rate hike until at least the end of the year.

Lawler added that there is a risk that the Fed sounds hawkish as it downplays a potential slowdown in the domestic economy.

"If the Fed says that it's adjusting its growth because of risks in the global economy or anything along those lines that could make them sound a little hawkish," he said.

Hansen added that a goldilocks outlook from the Fed -- not too hot and not too cold -- will also keep a bid under equity markets, which will cap any rally in gold.

Gold Will Still Keep It's Head Above Water

Although the Federal Reserve is not expecting to be dovish enough to drive gold prices higher, analysts are still not ready to give up on the yellow metal just yet.

Lawler said that the trend in gold is still higher as he sees sticky support around $1,280 an ounce. He added that gold remain an attractive safe-haven asset as global economic uncertainty builds.

"Overall there is still strong appetite for gold," he said. "I expect that any significant drop in gold prices will attract new buyers."

Hansen said that although there is technical bearish threats building in gold, it difficult to see prices falling significantly lower.

"There are still a lot of reasons to hold gold so I don™t see much downside either," he said.

Hansen added that he continue to remain long-term bullish on gold as long as prices hold above the key retracement level around $1,275 an ounce.

McKay also said that he sees limited downside for gold because of the global economy. Although U.S. economy remains resilient to outside threats, it can't remain strong on its own.

"At this point in the growth cycle a slowdown is natural," he said. "But if something breaks in China and Europe that will impact U.S. growth as well. On the back of slowing global economy, I don't see a lot of reasons to be overly bearish on gold."

Technical Risks To Watch

Although Hansen is long-term bullish on gold, he said that he is watching gold's technical closely as the price action is creating a bear flag formation.

"If we break below the recent lows at $1,290, we could see a sharp selloff," he said.

Source: Kitco News

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POPULAR NEWS
Gold poised to snap 4-day rally as metal hits a wall at around $1,370

Gold futures retreated on Monday, after a multiday rally as bullion, which has benefited from concerns about international trade clashes and a weakening global economy. The yellow metal for August delivery fell $7.50, or 0.6%, to $1,337, after closing Friday action wit a weekly loss of 0.1% based on the most-active contract prices as of June 7, FactSet data show. Prices on Friday had climbed to as high as $1,362.20, the highest since April 2018. Some commodity strategists say the precious...

USD/JPY: Tokyo open welcomes risk-on amid quiet trading

The USD/JPY pair trades little positive to 108.60 by the time Tokyo markets open on Monday. Even though lack of fresh developments concerning the US-China trade tussle and absence of major data confined market moves at the week™s start, the US Dollar (USD) pullback pleased buyers of ex-greenback majors during early Monday. India recently became the second Asian country, other than China, to levy tariffs on the US goods. The democratic country announced tariffs on 28 items from the US to...

Gold Retreats From 14-Month High as Fed Cut in Doubt

Gold dropped after hitting a 14-month high on Friday as upbeat economic data at the end of last week suggested that there wasn™t an urgent need for the Federal Reserve to cut interest rates. Spot gold as much as -0.4% to $1,336.26/oz, and traded at $1,340.08 at 9:19am in Singapore. Prices rose to $1,358.26 on Friday, highest level since April 2018. Bloomberg Dollar Spot Index steady after +0.4% Friday. U.S. stores and factories reported a pickup in activity...

Tokyo's Nikkei edges up with eyes on trade, central banks

Tokyo's benchmark Nikkei closed fractionally higher on Monday thanks to gains in blue-chip shares, with investor eyes on the US-China trade war and key central bank meetings this week. The Nikkei 225 index rose 0.03 percent, or 7.11 points, to 21,124.00, but the broader Topix index was down 0.45 percent, or 6.97 points, at 1,539.74. Source : AFP

Nikkei Tick Up in Sympathy With Hong Kong, Outlook Cloudy

Japanese share prices ticked up on Monday, erasing initial losses, after Hong Kong shares gained after Hong Kong™s leader indefinitely delayed an unpopular extradition bill that would allow citizens to be sent to mainland China for trial. Still, uncertainties over the global economy, U.S.-China trade frictions and the U.S. Federal Reserve™s policy stance kept many investors on sidelines. Japan™s Nikkei share average rose 0.11% to 21,140 but the broader Topix was down 0.24% at...

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