Gold has pierced the 1,410.00 level. The surge of the metal continues, as it has reached a high level not seen in years. There are two fundamental reasons for the event.
The US Dollar is losing value due to the expectations of the Fed stimulating the economy by doing a rate cut.
On the other hand, gold is surging a lot more than the USD drops on other charts. That is due to a big part of global market participants moving to safe assets.
Namely, the mentioned market participants think that the economy is already close to bursting and additional stimulus will pop an asset bubble.
Federal Reserve released the FOMC Statement, where the US policymakers provided in-depth insights into the economic and financial conditions that influenced their vote on maintaining the Federal Funds Rate unchanged. Note, that FOMC Economic Projections were released at the same time.
The Fed suggested that it would cut the interest rate in 2020. The median target for the federal funds rate remains 2.4% for 2019. Note, that the Federal Reserve has not cut the rate since the financial crisis. However, recent employment data set and inflation data releases have led analysts to forecast cut rates in the future.
Economic Calendar Analysis
Notable events for gold have ended this week. The historical data for the next week's scheduled events is available.
The data that is noted by the financial markets as important starts on Wednesday. On that day, the US Durable Goods Orders and Core Durable Goods Orders will be published at 12:30 GMT.
On Thursday, the US Final GDP will be published at 12:30 GMT. This is the least important GDP of the three quarterly publications of the US GDP.
The full review of all of the notable events of next week will be conducted in a video and published on our Dukascopy Webinars YouTube channel.
XAU/USD short-term forecast
During Thursday, the XAU/USD exchange rate reached the 1,390.00 level. During today's morning, the rate reversed south from the upper boundary of the long-term ascending channel at 1,402.50.
From a theoretical perspective, it is expected, that the price for gold could go downside, as it has to target the lower channel line. However, it is unlikely, that gold could tumble lower than 1,371.41 due to the support of the 55-hour SMA.
On the other hand, the exchange rate could reverse north from the psychological level at the 1,380.00 mark and re-test the upper channel line. If the given channel does not hold, gold could exceed the 1,410.00 level.
Hourly Chart
The fundamental surges are being paused by large scale patterns on the daily candle chart. By the middle of Friday, the last large scale pattern was broken and the middle of July technical target has already been passed.
If the surge continues, a daily candle chart with historical high levels will be presented, as historical highs are most likely going to provide resistance to the surge.
Daily Chart
Traders remain short on gold
On Friday, traders continued to be short on gold. On the Swiss Foreign Exchange 54% of open gold position volume was in short positions.
Meanwhile, in the 1000 base point range around the current metal's price the orders were no longer bearish. 60% of orders were set to buy.
Stop losses of short positions and buy to open long orders had become dominant from Thursday to Friday.