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Gold to see a wave of volatility due to Powell’s testimony and USD inflation?

November 13, 2019 21:30

Source: Economic Events November 13, 2019 - Admiral Markets' Forex Calendar

Today, the recent volatility in Gold could find a new trigger when the US inflation rate is published, and Fed chairman Jay Powell testimony on the economy before US Congress in the afternoon.

After the Fed cut came as expected, rates by 25 basis points on October 30, but didn't deliver any significant further impulses or signs in regards to future monetary policy steps. The "data dependent" part in the Fed statement left market participants speculating that the Fed won't deliver any dovish hints or a looser monetary policy announcement in the next few months.

"Obviously", because in the first days of November 10-year US-Treasury yields took on bullish momentum, gaining over 20 basis points while Gold dropped significantly below 1,500 USD.

With expectations among market participants of another Fed rate cut by 25 basis points in December dropping to around 5%, indicating that such a step is very unlikely, so the bullish outlook for Gold darkened a little.

But, if US core inflation comes in below the expected rate of 2.4% and in addition to that Jay Powell's remarks in front of the US Congress later that day raises fears around a rather sooner than later darkening US economic outlook, the yellow metal could make back at least some of the recent losses.

Still, only if Gold bulls succeed in breaking above 1,520 USD, another test of the current yearly highs around 1,557 USD would be possible, currently the mode seems short-term bearish.

Nevertheless, the overall technical picture on a daily time-frame looks still solid, didn't significantly darken after the drop below 1,500 USD, but instead brings now a potential mid-term long trigger around 1,440/450 USD into play:

Source: Admiral Markets MT5 with MT5-SE Add-on Gold Daily chart (between August 14, 2018, to November 12, 2019). Accessed: November 12, 2019, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2014, the value of Gold fell by 1.7%, in 2015, it fell by 10.4%, in 2016, it increased by 8.1%, in 2017, it increased by 13.1%, in 2018, it fell by 1.6%, meaning that after five years, it was up by 6.4%.

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