Gold bulls in a sweet spot for today’s Fed rate decision?

December 11, 2019

By Admiral Markets

Source: Economic Events December 11, 2019 – Admiral Markets’ Forex Calendar

On Wednesday the main event and focus will be on the Fed Rate Decision.

Last week, after US president Trump announced a plan to restore tariffs on steel and aluminium shipped from Brazil and Argentina, in addition to proposed tariffs “up to 100%” on certain French goods (about $2.4 billion worth) in retaliation for France’s digital services tax, risk-off in financial markets kicked in, initiating a drop in 10-year US-Treasuries yields.

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As a result, Gold pushed higher, but gave back most of its gains by the weekly close, after Non-Farm Payrolls beat expectations with 266,000.

While we doubt the sustainability of the strong employment print, what will certainly be of high interest now is the Fed rate decision today.

If Trump’s statements last week are to be believed, indicating no sign of urgency for a trade deal with China and the intention to wait until after the Presidential election in 2020, then they suggest that there is a very real possibility that the next set of US tariffs, due December 15,could go into effect.

Having that in mind, this seems especially true if the Fed doesn’t deliver a dovish stance today, as Trump suggested in his tweets last Monday.

As a result, it could be in a very bullish spot with either a very dovish Fed or a risk-off mode from Trump escalating the trade war with China in the second half of the week.

In addition to that, we also want already to keep an eye on the seasonal bullish window in Gold between December 18 and January 10, where Gold saw an average gain of 47 USD for 12 of the past 15 years, while in the remaining three years, it dropped on average only 19.65 USD, while the maximum loss and the maximum drawdown of 31.03 USD.

With that in mind, technically our picture switches to Long again with Gold breaking back above 1,520 USD which would level the path up to the current yearly highs around 1,557 USD:

Source: Admiral Markets MT5 with MT5-SE Add-on Gold Daily chart (between September 11, 2018, to December 11, 2019). Accessed: December 10, 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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