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Gold Looks Bearish as Traders wait on the Fed

Gold

Looking at the spot gold futures contract, the bullion fell sharply lower last Thursday and is trading below the 61.8 percent Fibonacci level. The weakness was due, in part, to broad strength of the U.S. dollar.

Spot gold traders will be focused on a pair of monetary decisions this week. First up, on Wednesday, the Federal Open Market Committee (FOMC), the U.S. Federal Reserve’s policy arm, is unlikely to make any changes with monetary policy.

On Thursday, the Bank of England will announce their monetary policy and interest rate decision. Inflation in the United Kingdom remains high. Consumer prices are also above the Bank of England’s two to three percent target. However, the BOE is not expected to announce any change towards monetary policy or interest rates.

Monday’s economic is very light. Germany will announce their monthly producer price index. The rest of the macroeconomic calendar is quiet. Neither the United Kingdom nor the United States have any economic data scheduled for release.

Daily Spot Gold Technical Analysis

Looking at the above daily (XAU/USD) spot gold chart, the 14 day relative strength index (RSI) is below 40. This is a signal that the yellow metal could see more losses as prices are still not oversold.

A daily close below $1,750 per ounce opens the door to challenge the downside barrier at $1,730 with $1,720 per ounce then coming into play. More losses could come into play if the 14 day relative strength index dips towards 30. In this case, the key psychological level of $1,700 could then come into play.

On the upside, a daily close above the 200 day simple moving average lining up near $1,810 per ounce could bring the bulls back into the market. With that said immediate technical resistance lines up at the 61.8 percent Fibonacci level at $1,770 per ounce and the key psychological level of $1,800 per punce is also a factor.

About David Frank

David has his MA and PhD in Economics. He is a technical analyst who has been trading in the Forex world for over a decade. As an analyst and trader, David believes in the big picture by blending together technical analysis with the fundamentals behind the scenes in the Forex and Bond markets. David’s trading strategy is unique. He blends an understanding of fundamental and macroeconomics with technical analysis to offer a unique view into Forex. He applies several strategies including carry long positions, to take advantage of high yields in non-volatile markets, as well as using quicker, chart related analysis for day trading.

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