Volatility in the gold market continues with prices flashing back to the upside and taking out yesterday's high at the same time the market temporarily regained the key $1,350 level again. However the $1,350 level has held the market back on five separate occasions since mid-February as if that is indeed some form of key pivot point.

Obviously the trade is looking ahead to tomorrow's Federal Reserve outcome with rate cut hopes stoked slightly by dovish talk from the ECB President this morning. Unfortunately for the bull camp the dollar has forged a fresh higher high and appears to be on track to return to the late May highs up around 98.00 and that could make further gains more difficult.

The gold market is apparently garnering fresh psychological support from bullish views toward gold flowing from a number of notable Wall Street icons. Some of these notable financial market professionals have indicated gold is attractive because of the prospect of a significant expansion of the US deficit in the face of recession, while others cited the unrelenting tariff war.

One of the afor mentioned traders indicated that gold could have an upside target of $1700. In fact traders might see the need for increased safe haven holdings of gold in the wake of news that China reduced its US treasury holdings to the lowest level in nearly 24 months yesterday as that could be a very subtle threat to the US from China.

In the short term it is possible that the trade will "buy the rumor" of tomorrow's Fed statement and therefore a period of trade above $1350 is possible. It is a little surprising that gold failed to charge back into positive territory yesterday following a very significant contraction in a US regional Fed manufacturing survey, as that would seem to tip the scales back in favor of Fed easing again, after last week's retail sales dampened rate cut prospects.

Underpinning gold prices is IMF news yesterday that Russia and Kazakhstan raised their gold holdings in May as that extends a trend of global central bank buying. The net purchases by the two central banks resulted in 11 tonnes of gold being purchases.

Critical scheduled data today from the US will include a sweep from housing starts and permits which could provide yet another insight into the Fed's Wednesday stance.

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