Spot gold remains consolidative ahead of today’s Fed decision. The yellow metal continues to trade within the confines of last Friday’s range with price action centered on the $1200 level.
A 25 bps rate hike is widely expected. The market will be hanging on the nuances of guidance, the economic projections and anything Powell says during the presser that might hint at any change to the present policy path.
The dollar index remains narrowly confined within its recent range as well, near the 11-week low set at 93.81 last week. The dominant feature on the DX chart remains the potential head-and-shoulders top formation, which suggests there is additional downside potential in the dollar.
Perhaps this pattern has formed amid a belief that the Fed will adopt a more dovish stance going into year-end. That doesn’t seem to mesh with the recent spate of U.S. economic data, which have been pretty strong. Nonetheless, from a technical perspective, the dollar looks toppy.
Renewed weakness in the dollar post-Fed should have a positive influence on gold. Penetration of the recent range highs at 1212.66/1214.32 would lends some credence to a bottoming scenario and shift focus to the 100-day moving average (1241.29 today). Such a move would likely make the shorts in the futures market rather nervous and could get the much-anticipated short-squeeze rolling.
On the other hand, if the Fed ratchets up the hawkishness, gold would likely put initial support at 1191.85 to the test. Penetration would favor a retest of secondary support at 1187.77. Below that, there’s some minor chart and Fibonacci support at 1183.15/1180.92 and then not much until the cycle low at 1160.27 (16-Aug).
Silver is consolidating within yesterday’s range. Yesterday’s solid move to the upside and close above the 20-day MA offers some encouragement to the bulls, but is probably not enough to really worry the bear crowd. That might change on a move above the 50-day (14.81 today).
On the downside, consolidation around 14.25/20 offers initial support, protecting the recent lows at 14.05 and 13.95.
Platinum consolidates below the 6-week high set on Friday at 839.19. Downticks have been limited, suggesting there is probably still some additional upside toward the 100-day MA (842.63 today). This level corresponds with a series of highs from July/August that reach as high as 844.13/845.10.
Palladium has set an 8-month high at 1075.40 today, negating the 78.6% retracement level at 1074.32. There’s not much in terms of significant resistances between the present level and the 15-Jan peak at 1139.62. Keep in mind though; this market has become quite overbought.
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