Fed uncertainty & geopolitical conflict affect gold

Gold Futures Higher in Early Trade – Trades within Triangle Pattern

Bullion.Directory precious metals analysis 21 July, 2014
By Christopher Lemieux
Senior FX and Commodities Analyst at FX Analytics

Gold futures are trading higher in early trade, up $5.30 to $1,314.70 per troy ounce. Traders are taking profits on Friday’s large risk-reversal as geopolitical conflicts still linger around the globe.

In Eastern Ukraine, the Ukrainian military has gone onto the offensive in an attempt to break up pro-Russian strongholds; and Israel continues its fight against Islamic militants within the Gaza strip.

Price action has meandered over the last couple sessions, as market participants weigh the possibilities of a sooner than expected bump in the Fed funds rate due to what some see as strengthening economy data.

Higher interest rates would generally strengthen the US dollar, which trades inversely with gold prices. However, there is much uncertainty regarding the Federal Reserve’s rate outlook.

Fed Chairwomen Janet Yellen has mentioned that rates are more than likely to remain near-zero long after the economy picks up.

Gold on the four-hour chart is trading within a symmetrical triangle pattern, bouncing off converging support and resistance trend lines.

Price action found support above the four-hour 200 EMA, and is trading just underneath minor resistance at $1,314.70 per toz. An intraday close above this level would signal a move to trend line resistance at $1,320.

There is a directional movement indicator (DMI) bullish crossover in the works, which would support higher prices.

A breakout of triangle resistance would target $1,330, while a rejection could send prices lower to retest $1,306.

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