Gold climbs to 5-month high as dollar feeling squeeze ahead of Fed

Gold continues to move higher this week. In Wednesday’s North American session, the spot price for one ounce of gold is $1252.76, up 0.27% on the day. On the release front, there are no major events out of United States. The markets are expecting the Federal Reserve to raise rates by a quarter-point. On Thursday, the U.S. publishes the Philly Fed Manufacturing Index and unemployment claims.

The U.S. dollar is under pressure, and gold has taken full advantage, gaining 1.3% this week. Earlier on Wednesday, gold touched a high of $1258, its highest level since mid-July. The gold rally could continue if Fed policymakers deliver a dovish message in the rate statement. With the U.S. economy showing signs of slowing and the stock markets showing sharp losses of late, the Fed may temper the rate hike by sounding dovish about the economy and future rate hikes.

A rate hike on Wednesday is widely expected, but is by no means a given. Just one week ago, the CME Group set the odds of a rate hike at 80%, but this has fallen to 69%. This concoction of a rate hike served with a dovish rate statement could shake up the U.S. dollar, so traders should treat the Fed statement as a market-mover. If the Fed statement is more dovish than expected and unnerves investors, investors could flock to safe-haven assets like gold and keep the current rally alive.

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XAU/USD Fundamentals

Wednesday (December 19)

  • 8:30 US Current Account. Estimate -125B. Actual -125B
  • 10:00 US Existing Home Sales. Estimate 5.20M. Actual 5.32M
  • 10:30 US Crude Oil Inventories.Estimate -2.7M. Actual -0.5M
  • 14:00 US FOMC Economic Projections
  • 14:00 US FOMC Statement
  • 14:00 US Federal Funds Rate. Estimate <2.50%
  • 14:30 US FOMC Press Conference

*All release times are EST

*Key events are in bold

XAU/USD for Wednesday, December 19, 2018

XAU/USD December 19 at 12:35 EST

Open: 1249.39 High: 1258.09 Low: 1246.83 Close: 1252.72

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1204 1220 1236 1261 1284 1306

In the Asian session, XAU/USD posted slight gains. The pair reversed directions in the European session and posted losses. XAU/USD climbed sharply in North American trade but has given up some of these gains

  • 1236 is providing support
  • 1261 is the next resistance line
  • Current range: 1236 to 1261

Further levels in both directions:

  • Below: 1236, 1220, 1204 and 1170
  • Above: 1261, 1284 and 1306

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.