The Federal Reserve’s latest FOMC meeting minutes, which were released to the public on Wednesday afternoon, were swiftly digested by the market. According to the FOMC minutes, the committee members discussed the possibility of both weaker-than-expected U.S. economic growth and higher-than-expected inflation. According to the FOMC minutes, additional data is required before the Fed changes its position on US interest rates.
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The market saw that as the Fed continuing to hold off on raising interest rates for a few months while it considers new economic data. We saw gold moving atleast 1% up next day as it is clear that US Fed is done with rate hikes. Another reason for the rally on Thursday was the weak US home sales. The data indicates that the economy in the United States has been contracting as a result of recent rate hikes by the Federal Reserve.
Our technical studies indicate that should gold continue to move higher the first level of resistance occurs at approximately $2040 in COMEX. This is based on a double top in which the first occurrence was on Thursday, June 1 and the second instance occurred on Friday, October 27. On both occasions, gold traded to $2040 before entering a shallow correction. Currently we only expect any breakout above $2010 if US Fed indicates dovish or neutral stance.
If it continues to maintain hawkish note, then we may see gold prices drifting downwards as it is near to its resistance zone. In MCX, one should wait for correction around 60500-60000 before taking long position with stoploss of 59500 and expected target of 61200-61300. Any long position should be kept light and with strict stoploss.
