The past week was anything but ordinary. Many mainstream expectations didn’t come true. For instance, the tension in the Middle East eased, the FOMC meeting conclusion came surprising, U.S. economy didn’t recover fully yet from the recession, and the physical demand on gold from Asia weakened.
Gold price opened the first trading session for the week ended on Friday 20 September at $1,330 per ounce. The price slid lower by the day ahead of the FOMC meeting till it touched $1,292 low as the market expects the Fed to start reducing the pace of economic stimulus. During the Fed meeting, the price of gold was spiking to the week’s high at $1,375 on the announcement of the Fed refraining from curbing their bond purchasing program in a move surprising the market. However, gold closed the week lower at the price of $1,325 per ounce.
On the short term analysis of the daily chart, gold price was below the fast 5-day EMA $1,340.09 (Orange) and the slower 35-day EMA (Blue) at $1,355.13. The Moving Average indicator movement shows gold prices were changing to form an uptrend since late June, as prices were higher than both short-term trend-following indicators. This move wasn’t a smooth one, as the prices at a time dipped below key resistance levels.
The MACD (20,60,18) indicator turned positive and last seen at the 1.223 mark confirming an uptrend. However, the trend is losing momentum slowly, as the indicator shows, unless another unexpected event takes place. The 14-day RSI indicator is at 42.8135, which might be considered as a neutral signal on the daily gold price chart. The RSI resistance, the previous peak, is at the 56 mark.
The general tension in the Middle East initiated some safe-haven demand which supported gold price from falling as the higher prices weakened the physical demand in China and India. It was a close-call ending the talk about a military strike in Syria and accepting to dismantle Syria’s chemical arsenal.
The focus of the market last week was the FOMC meeting. The FOMC decision to continue financial stimulus was also a close and right call at the time. The main problem in the U.S. is the higher-than-desired unemployment rate. As the Fed said before, it’s a dangerous move, but tapering too-soon might be catastrophic, and tapering too-late will increase inflation. Either way, gold bulls might benefit from the ultra-easy monetary policy or the chaos in case of wrong-timed tapering. The U.S. economy didn’t show signs of full-recovery yet; they are on the right track so far, but the results are slow. The QE have been going for 5 years now, which make it hard to tell if the economic growth is sustainable or not. Moreover, the next Fed chairman is a significant factor that would affect gold price.
The gold market is still under the pressure of U.S. economic data and fiscal policies. The FOMC meetings, right now, affect gold price more than traditional supply and demand theory. Gold miner companies retreats to higher-grade ores and lay off employees in an attempt to reduce costs. While a considerable volume of the demand is price oriented. It appears that the Fed and FOMC decisions will be a main drive for a while longer.