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Gold heads through 2018's 50% retracement and eyes are on critical 61.8% fibo

  • Following a positive settlement in the front-month futures contract, spot gold has continued to develop its uptrend.
  • The US dollar unwinds below the 97 handle to print fresh lows of 96.17 as investors take into account the FOMC's downside adjustments to the dot plot. 

Spot gold prices have pierced R2 at 1264, climbing steadily from a session low of $1,253/oz and change in an extension of the European session's low of $1,248.50/oz. Gold for February delivery on Comex added $11.50, or 0.9%, to finish up at $1,267.90/oz as being the highest for a most-active contract since June 25th, up around 3.4% month to date as we approach the final day's of business for the year.  However, Commodities were generally softer, in line with the tone surrounding global growth prospects, dragged by energy prices leading the CRB index into the red. 

Risk-off sentiment continues

Risk-off sentiment continued as the FOMC decision and concern over the growth outlook weighed with the S&P and DJIA down 1.0% and 1.2% respectively at the time of writing," analysts at ANZ Bank explained in a market wrap, adding, "But it’s hard to tell if price action is owing to capitulating stale long positions or signalling something more severe. Nonetheless, the mood appears to be changing on the US economy with softening manufacturing data last week and last night’s Philadelphia Fed Index suggesting a downturn in output is underway."

Gold now has the potential to really take off, if the dollar is indeed going to continue with this southerly trajectory following the market's take on the FOMC outcome. The greenback was initially bid, catching the street ff guard that was positioned for a more dovish outcome. However, the markets are now reconsidering dollar longs given that the outcome was indeed dovish and switched the tome in the dollar around in late Asia. The Fed did decrease the 2019 dots by one Fed hike and has set the stages to scale back the normalisation process as soon as next year. 

Gold levels

Gold prices are through S2 1264 while RSI extends towards 70 on the daily time frame and pierces that level on the 4hr sticks. On the upside, the 2018 50% Fibo level at 1262 was a key target which has now been breached. 1287 is the 2018 61.8% fibo. On the flipside, the 21-D SMA is now found down at 1236, tucked in just below S1 at 1238 guarding S2 located at 1231.

  • Support levels: 1248 1238 1231 
  • Resistance levels: 1264 1270 1287

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