Gold Prices are trading to new monthly highs today, and price action is set to close higher for the fifth consecutive trading session. This move has been predicated on the idea that that tomorrow’s event will yield no significant changes in monetary policy from the Fed. Expectations are for key interest rates to remain at 0.50%. However, a surprise hike or a change in rhetoric from the Fed may have drastic effects on the US Dollar as well as Gold.
Gold 4 Hour Chart
(Created using Marketscope 2.0 Charts)
Technical traders should note that next resistance level for Gold prices resides at 1,291.76. This area has been identified as an 88.6% Fibonacci retracement, which has been measured between the May 2016 high and the monthly low. If prices trade through this value during tomorrows trading, it would be another strong signal that the current bull trend in gold is set to continue. In this scenario, traders should then look for Gold prices to challenge the previous swing high located at 1,303.62.
Alternatively, if the US Dollar begins to rally during tomorrows FOMC event, traders may look for a decline in Gold under resistance. A breakout lower would be significant as it would suggest that Junes rally was nothing more than a retracement and allow prices to test key values of support. Areas of support may include 1233.98 as well the May low at 1,199.55.
SSI (speculative sentiment index) for Gold (Ticker XAU/USD) continues to slowly move toward extremes. Last week we reported that SSI read at -1.10, but now the index has shifted further short reading at -1.33. With 57% of positioning currently long, this reads as a marginal bullish bias for Gold. In the event of a breakout above resistance, SSI should continue to push towards a negative extreme. Alternatively, in the event that resistance holds, and Gold traders lower, it would be expected to see sentiment shift towards a more neutral value.
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