Precious metals lack conviction on the bid as US Dollar leans on less dovish FOMC minutes

Precious metals have been losing upside momentum of late as the US Dollar catches a bid for its safe-haven status and being the cleanest of dirty shir  |  09/10/2019 18:31
  • Gold, Silver and the US Dollar showed little reaction to the release of the FOMC minutes.
  • FOMC Meeting’s Minutes failed to impress, reiterating Chief’s Powell well-know message.
  • Gold for December delivery was at $1,513 an ounce shortly after the meeting minutes.

Precious metals have been losing upside momentum of late as the US Dollar catches a bid for its safe-haven status and being the cleanest of dirty shirts while the Federal Reserve shows no sigs of a sense of urgency to drastically change its approach to what appears to be a deterioration of the global economy. 

At the time of writing, Gold prices are firmly placed above the $1500 psychological level, trading between $1499.96 and $1511.47 on the day, unfazed by ho-hum Federal Open Market Committee's Minutes which failed to incentivise markets in either direction. Spot Silver prices have had a similar reaction on the release, stuck around $17.78 having travelled between $17.67 and $17.958 and flat on the day so far. 

FOMC Meeting’s Minutes failed to impress

The FOMC's Minutes failed to impress, reiterating Chief’s Powell well-know message: risks come from abroad, chances of a recession are limited, the economy overall healthy. The US Dollar can probably take some refuge under the paragraph which states that "several policymakers favoured keeping rates steady, saying baseline economic projection had changed very little and that uncertainties would not derail the expansion."

Gold prices climbed on Wednesday to snap a three-session streak of declines, as traders eyed developments ahead of U.S.-China trade talks. Prices then extended those gains in electronic trading after minutes from the Federal Open Market Committee’s September meeting showed that Fed officials had grown more worried about the economy. In electronic trading, gold for December delivery was at $1,513 an ounce shortly after the meeting minutes. The contract had climbed by $8.90, or 0.6%, to settle at $1,512.80 an ounce on Comex, ahead of the news.

In electronic trading, gold for December delivery was at $1,513 an ounce shortly after the meeting minutes and had climbed by $8.90, or 0.6%, to settle at $1,512.80 an ounce on Comex, ahead of the release. The DXY was flat and holds in bullish territory while trading on the 99 handle and above the 21-day moving average. 

"With a high proportion of real rates in negative territory, purchasing gold as an alternative to bonds is particularly attractive given the paradigm shift narrative,"

analysts at TD Securities explained. 

Gold levels

Technically, bulls are committed to the1500 psychological level and the next upside target will be 1520 ahead of a 1535 resistance level. Bears can target a break to below a 50% mean reversion of the late June swing lows to recent highs around 1460/70.

Silver levels

Technically, the price is showing little conviction while resting on the 21-day moving average without follow through to the upside, meeting offers just ahead of the 18 handle. Bulls will need to overcome a triple-top target of 18.60/80 before a run to the 19.60s and September highs. Below the 21 and 50-DMAs, the 61.8% down at 16.10 ahead of a run to the 200-day moving average down in the 15.90s will be compelling targets.  
 

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