Nothing much has happened for Gold in the past 24 hours after the FOMC event, with prices staying mostly within 1,360 – 1,375. However, the market has been relatively busy – US stocks traded lower, and is threatening to trade lower further. On the FX front, GBP/USD and AUD/USD have also pushed below their support levels post FOMC rally. Hence it is clear that things are moving, but Gold is not. It is interesting to note that prices during US session is also mostly stable even thought here are suspicion that QE Fear was in the air yesterday due to stronger than expected Housing and Employment numbers.
2 Hourly Chart
Nonetheless, the lack of action in Gold doesn’t mean outlook of Gold is sitting still. As of yesterday, the outlook for Gold remained on the downside, but with this latest development (or non-development) where Gold is able to stay flat when most other risk correlated assets are heading lower/has headed lower is a good support for further short-term bullish momentum. From a technical perspective, bears have missed their opportunity for a bearish movement with Stochastic readings already indicating a bearish cycle with readings more than halfway towards the Oversold region. However, 1,360 remains held and hence initiative is now given to the bullish side, where a bullish signal will be formed should price breaches 1,375 with Stoch levels bouncing off 20.0 and heading higher.
The overall big picture doesn’t change though, as price remains firmly underneath the descending Channel Bottom. The bearish Stoch cycle signal also remains intact, suggesting that bearish momentum is not yet broken. However, what is the big picture if not numerous small pictures? With Short-term bullishness looking robust, a retest of Channel Bottom is possible and with that a possible move within the Channel and a break of 1,400 and eventually Channel Top. There is no evidence that this will all take place, but certainly the possibility is there. Hence we shouldn’t take a bearish scenario for granted.
Fundamentally, we also need to find out whether the Institutional flow is back. Hedge Funds and other institutions have been spotted clearing their previous long positions, which is also reflected in last week’s COT numbers. Unfortunately, this Friday’s numbers will not be able to reflect current institutional positions as the numbers are based on Tuesday’s positions, before the FOMC announcement. It is likely that tonight’s COT numbers will reflect a fall in long positions, but do not automatically assume that this is an accurate reflection as the market has changed significantly since.
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