At the beginning of the fourth week of October, the Gold price stopped falling and increased by 1% over a single evening. By October 24th, the troy ounce costs $1281.00 with the daily high at $1285.30. So, what has happened?
Well, it’s all about external factors. This time, it was Donald Trump, who said that he was very close to choosing the next head of the Federal Reserve after Janet Yellen might leave her position. The short list of candidates includes Yellen herself (18% expectations), Kevin Warsh (15%), and Jerome Powell (60%). The rest of percentage shares are divided between other candidates, who aren’t expected to win at all.
The Powell scenario wasn’t considered as the major one before, but now it seems to be the most reasonable choice. First of all, Powell is a member of the Federal Reserve Board of Governors, the governing board of the US Federal Reserve. Secondly, when it comes to the monetary policy, he is on pretty the same page with Janet Yellen, who accomplished quite a lot during her tenure. A proper monetary strategy without any stresses is very important for the American economy improvement.
However, the question with the candidates is still open and investors started buying Gold in order to eliminate possible risks.
According to the Commodity Futures Trading Commission report, last week investors decreased the volume of the net long positions in Gold and decreased the volume of the net short positions. Still, they are not equal, 175K contracts against 26.3K contracts. Obviously, investors have a lot of other ways and options to hedge risks.
From the technical point of view, the long- and mid-term tendencies are rising ones. However, the short-term trend is bearish. The closest downside target of this trend is at 1254.00, which is the support level of the mid-term uptrend. This very support area may “decide the fate” of the mid-term trend in the nearest future. If the price rebounds from this area, it may start forming a new ascending impulse towards 1400.00. but if the instrument breaks 1254.00 and fixes below it, the price may fall towards 1186.00 to test the support level of the long-term rising channel.
Author: Dmitriy Gurkovskiy, Senior Analyst at RoboForex
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex bears no responsibility for trading results based on trading recommendations described in these analytical reviews.