Gold has been a favourite for traders recently, speculating as to when the Federal Reserve will begin to taper its monthly bond-purchases (QE). The tightening on monetary policy from the current level of $85 billion is expected to begin after this weeks (September 17-18) meeting.
Analyst’s expectations are that the Fed will reduce its current level by $10-15 billion per month, from the current $85 billion of purchases. The precious metal has been seen as a hedge against inflation, as central banks have loosened monetary policy to help nurture growth during the recession.
If the Federal Reserve surprises the market and doesn’t begin to taper at this meeting, or signal that further tightening is some time off, it would be expected for there to be a strong upside potential for the asset.
On Sunday evening it was announced that Larry Summers had pulled out of the race to succeed Ben Bernanke as Chairman of the Federal Reserve at the end of his term in January 2014. Summers is seen as one of the more hawkish candidates and a favourite of President Obama.
Daily Fibonacci retracement levels from the low of the year (27th June 2013) would expect there to be support at the 50% Fib level (1307.38). Gold has been trending lower since the middle of August, with intermittent support before moving lower.
The RSI is at 30.26 indicating that the asset is relatively oversold and the move.
If the Fibonacci retracement is drawn from the more recent low of 1273.35, then the 1311.19 is the 76.4% Fib and should see some buying to give support:
Please note that the above is for information only. Abshire-Smith is an execution only brokerage, and trading decisions should be based on personal research and understanding. If you are unsure please contact an independent financial advisor.