Gold - profit taking could be seen before further upside
Action after Fed decision
Gold jumped to a high of $1296.74 levels before trimming gains slightly to trade around $1290. Note, the metal has rallied for seven out of 9 trading days (including today).
Sell the fact trade likely
Fed June/July rate hike bets took a dive after May non-farm payrolls report printed horribly weak and also carried significant downward revisions to the previous month's figure. Rate hike bets nosedived further after Brexit fears made a comeback.
Consequently, markets were expecting Fed to come out dovish. It was expected to revise GDP forecasts lower along with interest rate projections (for 2016 as well). The metal may have priced-in the dovish expectations and Brexit fears may have little to do with the rally. This is because Cable is still well above its cyclical low of 1.3835. Thus, though Brexit fears made a comeback, I infer they were not that intense to fuel rally in gold.
Furthermore, Fed still expects two more rate hikes this year and this is ought to surprise many. This could be the reason why Gold has not even touched $1300 level so far. Thus, a correction appears likely before the metal resumes its upward journey. Another leg higher could be seen before the weekend if Bank of Japan presses the easing button again.
Technicals
Gold jumped to a high of $1296.74 levels before trimming gains slightly to trade around $1290. Note, the metal has rallied for seven out of 9 trading days (including today).
Sell the fact trade likely
Fed June/July rate hike bets took a dive after May non-farm payrolls report printed horribly weak and also carried significant downward revisions to the previous month's figure. Rate hike bets nosedived further after Brexit fears made a comeback.
Consequently, markets were expecting Fed to come out dovish. It was expected to revise GDP forecasts lower along with interest rate projections (for 2016 as well). The metal may have priced-in the dovish expectations and Brexit fears may have little to do with the rally. This is because Cable is still well above its cyclical low of 1.3835. Thus, though Brexit fears made a comeback, I infer they were not that intense to fuel rally in gold.
Furthermore, Fed still expects two more rate hikes this year and this is ought to surprise many. This could be the reason why Gold has not even touched $1300 level so far. Thus, a correction appears likely before the metal resumes its upward journey. Another leg higher could be seen before the weekend if Bank of Japan presses the easing button again.
Technicals
- On the daily chart, we see the RSI has breached falling trend line, however, check on the right hand side, the 4-hour RSI is turning lower from the overbought region.
- Failure on the part of the metal to see a day end closing above $1303 followed by a break below $1289 could signal a possible drop to $1276-1263 levels.
- On the higher side, a day end closing above $1310 could yield $1325.
