Gold Continues to Consolidate as it Builds a Base Around $1500

On September 4^th gold futures closed at the highest value this year trading to an intraday high above $1565, and closing at $1560 per ounce. Immediately following gold futures reaching a new price high for the year it would close lower for four consecutive trading days, plunging below $1500 as it traded to an intraday low of $1492 on September 10^th. From that point forward gold began a period of consolidation as it traded around $1500 which continues to this day.

Between September 10^th and September 19^th gold would trade as high as $1533, and as low as $1490, as prices continued to consolidate and form a base right around $1500. That scenario continues as gold has potentially found support. It is our current belief that gold is consolidating after falling over $70 in four trading days.

Yesterday the Federal Reserve concluded this month’s FOMC meeting and announced that they have reduced their key “Fed funds” rate by a ¼% (25 basis points). With an expanded range gold closed at its highest price since the decline which concluded on September 10^th at $1515, and traded to its lowest intraday price point of $1490. Today’s price range includes a lower high and higher low than the previous day, and closed above its opening price of $1502. As of 4:35 PM EDT gold is lower on the day, with the December contract fixed at $1506.20.

The dynamics which have been supporting current pricing at this level remain. This weekend’s strike on the oil production facility in Saudi Arabia has raised tensions in the Middle East. Currently our administration has announced its intent to initiate new sanctions on Iran, but has not spoken about military options. Today Iran announced that any military reprisals would lead to a major war and conflict.

The trade war between the United States and China continues to be unresolved, although both superpowers are headed back to the negotiation tables and there seems to be a more optimistic tone. Brexit remains wildcard, and whether or not there will be a hard exit from the European Union is still unknown.

These geopolitical concerns continue to influence market sentiment and have been supportive of gold as a safe haven asset. The net result of these concerns is gold continues to consolidate and form a base right around $1500 per ounce.

Wishing you as always, good trading,