Gold Price Forecast: Monthly-High On Radar As RSI Clings To Bullish Trend

GOLD TALKING POINTS

Gold pares the weakness from the previous week as the Federal Reserve comes under increased pressure to keep the benchmark interest rate on hold, with prices for bullion eyeing the monthly-high ($1251) as the Relative Strength Index (RSI) clings to the bullish formation carried over from the previous month.

Image of daily change for major financial markets

GOLD PRICE FORECAST: MONTHLY-HIGH ON RADAR AS RSI CLINGS TO BULLISH TREND

Image of daily change for gold prices

There appears to be growing interest surrounding the Federal Open Market Committee (FOMC) interest rate decision on December 19 as White House trade adviser Peter Navarro argues that the central bank should sit on the sidelines ‘because the economy is growing without inflation,’ and there appears to be a shift in market expectations as Fed officials adopt a less-hawkish tone ahead of their last meeting for 2018.

Image of fed fund futures

Even though the FOMC appears to be on track to deliver a 25bp rate-hike later this week, Fed Fund Futures now show the central bank on hold throughout the first-half of near year, with the committee already expected to keep the benchmark interest rate at 2.25% to 2.50% in June 2019.

Recent remarks from Chairman Jerome Powell & Co. suggest the central will continue to drop the hawkish tone as household face subdued wage growth paired with cost-push inflation emerging from the shift in the U.S. trade policy, and it remains to be seen if Fed officials will continue to forecast a longer-run interest rate of 2.75% to 3.00% as ‘contacts in many Districts indicated that input costs had risen and that increased tariffs were raising costs.’ With that said, diminishing bets for a higher borrowing cost may keep gold prices afloat, but sentiment surrounding bullion remains skewed as the retail crowd continues to bet on a larger correction.

Image of IG client sentiment for gold

 

The IG Client Sentiment Report shows 78.3% of traders are net-long gold compared 76.7% last week, with the ratio of traders long to short at 3.61 to 1. The number of traders net-long is 1.7% higher than yesterday and 0.8% higher from last week, while the number of traders net-short is 21.5% higher than yesterday and 7.0% lower from last week.

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Disclosure: Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment ...

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