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Gold Holding at Highs
The rally in gold prices has seen the futures market breaking out to fresh all-time highs in recent sessions. While momentum has paused for now, as traders await tomorrow’s keenly anticipated FOMC meeting, US retail sales later today could provide some more movement in the interim.
Easing Expectations
The market is now increasingly expecting a larger .5% cut at tomorrow’s meeting with the CME group pricing the move at 69%, up from just 13% at the start of last week. Against this backdrop, any fresh data weakness today is likely to further feed into this narrative, boosting expectations of a deeper cut while sending USD lower and gold higher.
Retail Sales Forecasts
On the numbers front today, the market is looking for the core monthly reading to cool to 0.2% from 0.4% prior with the headline to track down to -0.2% from 1% prior. If seen, these readings should keep bearish pressure on USD into the meeting, allowing gold to drift higher. A downside surprise would be the ideal scenario for gold bulls, while any upside surprise might see gold soften as traders scale back their expectations of a bigger cut tomorrow.
Risks to Watch
It’s worth remembering that the recent NFP and CPI readings didn’t lead USD lower or see a shift higher in pricing for a deeper cut, that dynamic began last week in response to dovish comments from former FOMC member Dudley and dovish headlines from the WSJ and FT. As such, despite increased market expectations, the Fed could still opt for a smaller cut tomorrow which, if seen, would be bearish for gold near-term.
Technical Views
Gold
The rally in gold has seen the market breaking out above the 2,430.59 level and above the bull channel highs. While above here, and with momentum studies bullish, focus is on a continued push higher. To the downside, 2,483.27 remains the key support to watch.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.