Gold Trades Slightly Positive with Fed Decision Approaching

Gold has continued to avoid a retest of the psychological $1100/oz level, finding support above 12/11 lows and our 4th tier uptrend line. The precious metal is experiencing a bit of intraday strength after U.S. economic data printed in line with analyst estimates. The EUR/USD and AUD/USD are continuing their consolidative patterns as the Cable pops in reaction to encouraging CCC data. That being said, gold seems to be following the broad-based sideways movement of the Dollar as investors await the Fed’s monetary policy decision. Although the Fed is expected to keep its monetary policy unchanged, any slight tightening of its monetary policy stance in response to recent unemployment and consumption data could yield Dollar strength and gold weakness. However, if the Fed downplays the recent upturn in economic data and affirms its past monetary policy, then we may witness a bounce in gold and weakness in the Dollar. Regardless gold and the FX markets could be in for a bit of volatility as investors digest today’s economic data along with the Fed’s upcoming decision. Hence, investors should monitor activity in the FX markets, particularly in the EUR/USD and AUD/USD. Any significant setbacks in these currency pairs could drag gold lower due to the precious metal’s negative correlation with the Dollar.

Technically speaking, gold has multiple uptrend lines serving as technical cushions along with 12/11, 12/9, 11/13, and 11/10 lows. Furthermore, the psychological $1100/oz level could serve as a reliable technical support should it be tested. As for the topside, gold faces topside technical barriers in the form of 12/11,12/9 and 12/7 highs along with the psychological $1150/oz and $1175/oz levels.

Present Price: $1130.60oz

Resistances: $1134.47/oz, $1141.42/oz, $1147.54/oz, $1152.45/oz, $1158.98/oz, $1164.29/oz

Supports: $1128.34/oz, $1123.03/oz, $1115.27/oz, $1110.77/oz, $1105.05/oz, $1100.15/oz

Psychological: $1100/oz, $1150/oz, $1175/oz