Gold prices weaker as Federal Reserve not so easy

September 18, 2019

New York (Sept 18)  Gold and silver prices are weaker in afternoon U.S. trading Wednesday, in the wake of the just-released FOMC statement that did not lean as accommodative on U.S. monetary policy as many expected. December gold futures were last down $2.50 an ounce at 1,510.50. December Comex silver prices were last down $0.27 at $17.88 an ounce.

The big U.S. economic event this week saw the just-concluded Federal Reserve’s Open Market Committee (FOMC) cut U.S. interest rates (the “Fed funds” rate) by 0.25%, to 1.75% to 2%. The move was expected by the marketplace. However, the FOMC members were split on the move, voting 7 to 3 in favor of the cut. Seven of 17 FOMC members expect just one more interest rate cut this year. The FOMC statement also said the U.S. economy continues to expand but uncertainties remain on the global economic outlook. The marketplace deemed the FOMC statement as not so easy on U.S. monetary policy as many had expected, despite the rate cut. The U.S. dollar index rallied moderately on the rate reduction, while the U.S. stock market saw some selling pressure.

At mid-week the marketplace is not as anxious as earlier this week, in the wake of the weekend terrorist attack on Saudi oil installations. Still, traders and investors are wondering when “the next shoe will drop” on this matter.

After a spike up in very short term lending rates on Tuesday, the overnight rates returned to normal levels Wednesday, after the Federal Reserve injected liquidity into the financial system. While some traders and institutions were rattled by the matter, the overall marketplace was not impacted. Still, some market watchers wonder if this development has more important, and possibly dire, implications down the road.

Nymex crude oil prices are lower and trading around $58.00 a barrel. Reports at mid-week said the damaged Saudi oil installations will be back on line much sooner than expected—by the end of this month.

Technically, December gold futures bulls still have the solid overall near-term technical advantage and are keeping in place a 3.5-month-old uptrend on the daily bar chart. However, the bulls need to show fresh power soon to keep the price uptrend alive. Gold bulls' next upside near-term price breakout objective is to produce a close above solid technical resistance at the September high of $1,566.20. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at $1,485.00. First resistance is seen at this week’s high of $1,519.70 and then at $1,525.00.


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