Gold Price Outlook: Gold Grasps for Support Ahead of ECB, FOMC

Gold Price Outlook Talking Points:

• Gold prices have held at support above the 1500 area after yet another failed test above the 1550 marker.

• This week‘s economic calendar brings an ECB rate decision and next week brings the FOMC. Both banks are expected to soften policy and that’s already likely priced-in to some degree. More importantly – what might each bank be looking at for future policy modifications in Q4 of this year？

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Gold Grasps at Support, Remains Long-Term Overbought

The next couple of weeks bring two highly-awaited Central Bank rate decisions out of Europe and then the US. Both meetings are expected to produce some form of softening and, at this point, there‘s likely a portion of that already priced-in to the Euro and the US Dollar. But what else is on the cards for Q4 of this year, that’s what market participants will be looking for around each respective rate decision.

Given the current backdrop, where pretty much all large Central Banks are either in some form of dovish policy or at the very least investigating such, and the setup around Gold remains very interesting. Gold prices have been trending-higher for about a year now, setting a low mid-August of 2018 and continuing to gain ever since. That bullish run hastened in Q4 of last year as expectations around the Fed started to soften, with another major push showing around the June open just as Jerome Powell talked up the prospect of dovish policy.

Eventually, this produced a deep overbought reading with RSI on the weekly chart moving to its highest since 2011, right around the time that the post-GFC run in Gold started to top-out above the 1900 level. Since then, the bullish run has stalled at a key area of resistance, taken from Fibonacci levels at 1509-1527.

Gold Price Weekly Chart

Chart prepared by James Stanley; Gold on Tradingview

On a shorter-term basis, bulls havent yet relented despite the continued overbought readings on longer-term charts. As looked at last Thursday, the 1550 level has become a tough area for spot Gold as prices have now posed three different resistance inflections upon tests above this level. This has led to a pullback to the 1509 Fibonacci level mentioned in that piece which has since helped to hold the lows, with an assist from a trend-line projection connecting June highs and August lows.

Gold Eight-Hour Price Chart

Chart prepared by James Stanley; Gold on Tradingview

Gold Price Strategy Moving Forward

Given the aggressive bullish theme thats shown in Gold over the past year and, more importantly, the past few months as expectations have grown for even softer approaches out of global Central Banks, and the topside of Gold can remain as attractive. The bigger question is how aggressively one wants to approach that theme, particularly considering the longer-term overbought nature of the move.

For very aggressive approaches, the same 1509 level looked at previously that continues to help hold the lows can be usable with stops investigated below the Friday swing-low. Underneath this, another area of interest exists around the 1493 level, and, below that, another area of support potential in the 1475-1480 zone.

Gold Price Four-Hour Chart

Chart prepared by James Stanley; Gold on Tradingview