Gold Price Forecast: Biggest week yet for 'Gold-2019'

October 26, 2019

New York (Oct 26)  Due to a technical break to the upside and forthcoming fundamentals, Gold has the potential to start to climb back to prior highs on many risk events for the week ahead. Trade will be awash with a number of potential catalysts, including, trade wars, Brexit shenanigans 31st Oct Brexit), the Federal Open Market Committee (FOMC) and the list goes on – Germany inflation, Bank of Canada & Canadian Gross Domestic Produce, and not least, Chinese Manufacturing PMIs.

The week that was:

Gold climbed higher on the week, and in the last four consecutive days, the price made a series of higher highs and lows and spiked through the August - September trend-line resistance, reminding the markets that there are plenty of risks on the boil for which could be a long-term supportive factor for the precious, safe-haven metal.

The metal climbed from the start of the week's lows and took on a bullish technical picture the moment it pierced the 21-day moving average and closed in on the psychological 1500s again. Despite  'some' positive sounds surrounding a Phase-1 trade deal between the US and China, Brexit was a top focus on the geopolitical map which capricious headlines, in nature, kept investors on the sidelines and Gold bid.

At the same time, Durable Goods were a disappointment ahead of next week's FOMC. To top it all off, some hawkish rhetoric from the US Administration on China started to filter its way through the cracks of optimism from both Vice President Mike Pence and Trump advisor and China hawk, Narriavo, antagonising fragile relations between the two economic powers – evidently supportive of the final push in the week from the Gold bulls to snap the trendline resistance in half.

US data in view

US Durable Goods orders were a little weaker than expected but less so in ex-transport. Still, the data had a material impact on the US Dollar as we head into the FOMC next week and indeed, Gold received a nice bid. In other data, the Initial Jobless Claims were on the mark and, much to observer's relief,  the manufacturing PMI was a touch better than expected while services PMI came on point.

Looking ahead, its eyes on the FOMC. It will not be too surprising to see the Federal Reserve cut interest rates by another 25 basis points next week for a third consecutive rate cut since July. "The FOMC is likely to communicate patience in deciding future policy moves after next week's cut as they assess the impact of the three cuts they have already delivered," analysts at TD Securities explained, adding, that they look for the Fed to temporarily pause before resuming rate cuts in Q1 2020 - (So, this could be a one and done Christmas spending booster to stand the US economy on a firmer footing on a consumer basis as we head into the New Year).

Geopolitics in focus

Meanwhile, the day of reckoning for the UK and EU with respect to Brexit has arrived. The 31st Oct is supposed to be Brexit day. But as ever, we are none the wiser of how this saga is going to end. At this moment in time, the law says that the UK leaves the EU at 11 pm on 31 Oct without a deal.  However, during the week, the UK Lawmakers threw yet another spanner in the works by voting down the Government's timeline which meant that, by default, Boris Johnson has to see through his commitment and receive an extension from the EU, thus forcing him to call for a snap election on December 12th. However, nothing is ever certain in UK politics these days and he needs Labour votes to do so, but Labour is waiting to commit until it finds out how long the EU will extend. This also means that the EU won't agree to an extension until it sees if Labour votes for an election.

 "Base case: extension to 31 Jan, but it could be messy," analysts at TD Securities warned.

Technical Outlook

Technically, the price has been testing the bear's commitments at trendline resistance where it meets the 1500 level, a psychologically important round number which guards a run towards 1520. In fact,  bulls managed a score to 1518 on Friday but were rejected heavily, leaving a bearish pin bar right back to the trendline.

Casting an eye over the daily chart, the next key level will be the 1535 resistance target. On the flipside, on failures to hold in the 1500s, bears, instead will be looking towards a 50% mean reversion of the late July swing lows to recent highs level around 1460/70.


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