Gold's rally after this week's Fed decision reversed by the close, even though three policymakers dissented in favor of a rate hike. Traders now wait on the US CPI report due August 12 and any Middle East de-escalation to set the metal's next move, while a bout of Japanese and South Korean FX intervention added volatility along the way.
Gold strengthened right after the FOMC decision, despite three dissenters voting for a rate hike, but the broader outlook stayed unchanged and the gains were fully erased.
Dissents fail to shift the outlook
The consensus was that Fed's Logan and Fed's Hammack would prefer a rate increase, but the hawkish Fed's Kashkari also joined them. Roughly 30% odds of a hike were already priced in before the release, so the dissents triggered hedges getting unwound rather than a lasting repricing. Fed Chair Warsh gave no clues about the next meeting, continuing to limit forward guidance. Therefore, the next US CPI report on August 12 will likely decide whether the Fed hikes in September.
Dollar slide and Middle East risk
Gold also got a boost as strong selling hit the US dollar, after Japan and South Korea intervened in the FX market. The moves in the USD/JPY pair were massive, and the flows spilled into other markets on a noisy, volatile month-end trading day. On the geopolitical side, the Middle East situation has barely changed, though Trump's rhetoric appears to have softened. Until a clear de-escalation emerges, inflation risks stay skewed to the upside.
Technical picture: 4,200 and 3,885 in focus
On the daily chart, gold is breaking above its downward trendline, and buyers may look to position for a rally toward the 4,400 level, while sellers want a return below the trendline to open a drop toward 3,885. The four-hour chart has been rangebound since late June, with buyers needing a break above the 4,200 resistance to gain conviction for a reversal and sellers eyeing the same zone to fade back toward 3,885. On the one-hour chart, a resistance zone near 4,120 has rejected price several times over the past weeks.
Source: Investinglive
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