Gold Prices Remain Resolute in Light of Fed Resolve

Gold futures are trading modestly higher as a result of Fed minutes which were released yesterday. These minutes underlined the resolve of the Federal Reserve to implement another interest rate hike in June. Recent price action in gold has clearly illustrated a firm and steadfast base forming at $1250 per ounce.

Over the last four trading days, gold prices have opened and closed above that price point. This follows a recent substantial price advance, which took gold prices from their low at 1215 to an intraday high around 1265.

As of 345 Eastern Standard Time, gold futures are trading up $2.30 (+0.18%) at $1255.40. With an extremely narrow and defined trading range of seven dollars, it appears market participants are transitioning into holiday mode, with the upcoming three-day weekend set to begin after trading tomorrow.

Market Participants Continue to Bet on U.S. Equities

A risk-on environment continues to permeate the financial markets. This becomes evident as the Dow Jones Industrial Average, NASDAQ Composite and the Standard & Poor’s 500 are on track to close at new record highs today. Although all three indexes are trading higher on the day, the percentage gains in both the Dow and the S&P are dwarfed when considering a 0.75% daily gain in the NASDAQ Composite Index.

Considering such a milestone move in U.S. equities, gold’s prices continued to show solid price support. As reported in a Bloomberg interview yesterday, Chris Louney, a commodities strategist at RBC Capital Markets, said, “We see a number of risks in the marketplace to either side but our baseline view is the reason to hold gold is as a risk overlay, especially in this market of low volatility.”

Solid Technical Indicators

On a technical basis, our current studies indicate solid support at $1250 per ounce in gold. The key factor to look at is whether gold prices can remain above the 50 and 200-day moving averages.

Earlier this week, market technicians observed a golden cross, which is created when the shorter-term moving average crosses above the longer-term moving average. In this instance, Monday's price action resulted in gold’s 50-day moving average crossing above the longer-term 200-day moving average. If gold pricing remains above these moving averages, the short-term outlook for gold shows strong support with the potential for higher pricing.

Wishing you as always, good trading,