Could 78% Be A Golden Number for Gold?

Could the 78% retracement level be the technical level in which gold finds a supportive price point, at least on a tentative basis? Gold opened this morning in New York, trading under pressure and then moving intraday to a six-month low. This low, which occurred at roughly $1238, is an exact 78% retracement of the $163 rally which took gold prices from $1200 per ounce in July to $1363 in September.

As of 3:00 PM Eastern standard time, the most active February gold futures are trading at $1245.30. This shows a net decline of a $1.60 on the day. It is also well off the lows that were hit this morning at $1238.30.

At the same time, spot gold is trading fractionally higher and is currently up $2.00 and fixed at $1243.40. Traders buying the precious yellow metal bid up current pricing by a total of four dollars with a two dollar decrease due to a strengthening US dollar, according to the Kitco Gold Index.

Waiting on the Fed

The Federal Open Market Committee (FOMC) began their final meeting of 2017 this morning. Following tomorrow’s conclusion, the Fed will release a statement. This will be followed by Janet Yellen’s final press conference as the head of the largest central bank in the world. It is widely expected, and factored into current pricing, that they will announce a rate hike, the third rate hike this year. In fact, the CME’s FedWatch tool predicts a 90.2% probability that we will see one final rate hike during this calendar year, and that rate hike would be announced tomorrow.

It will be the release of tomorrow’s statement that will genuinely foster the greatest interest as traders and market participants glean the written statement for insights into the Fed’s anticipated actions in 2018. Currently, the expectations are for 2 to 3 rate hikes to be implemented next year. As such, we would anticipate no major reaction should the Fed outline their actions in line with current expectations.

Although unlikely, should the Fed outline a more aggressive stance or outline a more accommodative monetary policy than currently anticipated, we could see repercussions in U.S. equities, the dollar as well as gold pricing.

As such, we expect muted action with a relatively compressed price range as traders await the FOMC statement on Wednesday afternoon.

Wishing you as always, good trading,