• NG
    2.27 USD 0.27%
    256.22 USD -1.15%
    70.04 USD -2.02%
  • XAG
    23.96 USD -0.14%
  • XAU
    2010.5 USD 0.48%
  • XCU
    3.73 USD -1.34%
  • XPD
    1478 USD -0.78%
  • XPT
    1048 USD 0.64%
  • ALU
    2243.47 USD -2.23%
  • RICE
    18 USD -1.75%
    74.17 USD -1.32%
    14.35 USD -0.66%

Gold looked under $1700 level

Determination in the fight against inflation confirms the hawkishness of the monetary policy. Gold reacted negatively and tested a level of $1700.

Monetary policy against inflation

Monetary policy persists in a negative correlation to gold. Fed chairman Jerome Powell stated his opinion about the fight against inflation. The target of the US monetary policy maker is about a 4% interest rate which should persist for a few years. Moreover, Powell’s speech showed his strong inspiration from the 80s monetary policy. That could mean continuous hawkish rhetoric. 

We have informed about this topic: Jackson Hole statement determined the next move in markets

Gold tested $1700 

Gold has a negative correlation to interest rates. This means that higher interest rates favor financial assets with interest, while gold has no interest. This hurts gold’s competitiveness. A negative trend is clearly seen this week when on Thursday, gold tested the $1700 level.

This level works as support, which declares Friday’s course of bullion. Non-farm payrolls were higher (315k) than expected (300k) and US Dollar declines against its counterparts. Gold is up +1.17% at the level of $1728,7. Resistance could be around the area of $1740-$1755. Next resistance could be at $1764,1, which represents the Point of Control (POC – the highest volume in a particular session) from the 26th of August. The important support level stays around $1700s, as the strong psychological level. 

30 minutes chart of GC (Gold Futures), Daily Market Profile. Source: Author's analysis

30 minutes chart of GC (Gold Futures), Daily Market Profile. Source: Author’s analysis

Course determination for the markets

Despite the short-term corrections in the price of yellow metal, the main fundament seems to be clear. Jackson Hole Symposium brought quite a strict press conference from Powell. Higher interest rates and strong determination in the fight against inflation confirmed the current trend. Hawkishness could persist in the markets for some time. 

Tomas is a professional trader and money manager on foreign exchange market from 2014. His main domain are commodities. Experiences gained due this period are transformed to consul...


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