Top Story

Gold poised for breakout on ‘lower-for-longer’ interest rates

Though the European Central Bank (ECB) announced its decision on Thursday to leave its monetary policy unchanged, as expected, it is still widely anticipated that the central bank will soon be in the position to extend its easing programs further. Meanwhile, the long-awaited 2nd rate hike in ten years by the US Federal Reserve has still failed to materialize, and may well have hit a further snag after a series of relatively weak US economic data releases within the past week.

If this ‘lower-for-longer’ global trend continues with respect to interest rates, as appears likely, one of the primary assets that would clearly be in the position to benefit the most is non-interest-bearing, dollar-denominated gold. In a prolonged low-interest-rate global environment, particularly if the US dollar is also pressured as a result, the appeal of gold generally rises.

Such a rise has been manifested for the past several months with the price of gold making a steady recovery from the $1050-area multi-year lows of late last year. This recovery has formed a rough parallel uptrend channel on the charts, which has framed the precious metal’s general bullishness within the past nine months.

In the past two months, the price of gold has been trading in a moderate pullback from its $1375-area highs of early July. This pullback has formed a gently descending trend line, which was re-tested earlier this week on a gold surge up to the $1350 resistance level that was driven by weak US economic data.

In the two-week run-up to the Fed’s next policy meeting, additional US economic data releases will further inform the market’s view of rate hike probabilities. At the current time, the greater likelihood is that there will be no September rate hike. If this continues to be the case, gold could potentially break out above the noted downtrend line and $1350 resistance level. In this event, the next major upside targets are at the mentioned $1375 high, followed by the key $1425 resistance objective.

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

The markets are moving. Stop missing out.

OPEN AN ACCOUNT