Gold miners rejoice as gold moves higher

Friday, 19th July 2019 10:21 - by Rajan Dhall

Gold miners are reaping the rewards of dovish Fed members. Last night New York Fed chairman Williams stated that the Fed should act preventatively in order to avoid disaster. As soon as the comment was made the Dollar capitulated and gold shot higher breaking the consolidation high to reach USD 1452.95/oz. It is also worth noting that there is a 1 week blackout period where Fed members are not allowed to communicate any thoughts on policy to the press. This move to a more dovish stance has been coming since US President Trump's criticism of the central bank's policy. A cut next month is now priced in by about 70% and the market are now guessing on the steepness of the cuts now. 

It has been said that central banks around the world have been stocking up their gold piles. The Peoples Bank of China (PBoC) have doubled their gold reserves this year and reduced their treasury holdings. Russia and Poland are amongst others who have been replenishing their gold reserves. 

From a technical point of view, we now may get a small retest of the previous consolidation high of around USD 1378/oz especially if the Fed disappoint and not cut as much as the market expects. The next target on the upside is USD 1523/oz which was the consolidation low from 2012 following the great gold rally. Over the last three weeks, the candles have rejected the highs and made bearish candle formations on the weekly candles but this week looks slightly different. The comments from Williams look to have given gold bugs the catalyst to break higher.

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.