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Gold welcomes weaker dollar

Gold glittered slightly on Friday as the dollar weakened, clawing back some the previous sessions losses amid hawkish comments on rates from Fed officials. Nevertheless, gold bulls remain in a position of power as signs of easing inflationary pressures in the United States reduce the pressure for the Fed to raise rates aggressively. In the week ahead, gold is likely to draw fresh strength from a weaker dollar and subdued Treasury yields, in addition to numerous speeches from Fed members.

It may be wise to keep a close eye on the FOMC minutes which could provide clues on the pace of US rate hikes. Although the Fed raised interest by 75 basis points at the November meeting, it signalled that the next hike could be smaller. Any fresh information regarding this could reinforce expectations around the Fed dialling back on aggressive rates, especially after the soft US inflation figures. Such an outcome is likely to weaken the dollar further -ultimately support gold prices.

Looking at the technical picture, gold remains bullish on the daily charts as there have been consistently higher highs and higher lows. A solid daily close above $1780 could encourage an incline towards the psychological $1800 resistance level – where the 200-day SMA resides. Should this resistance prove to be a tough nut to crack, prices could descend back below $1780 with the next key level of interest found at $1750 and $1715 – just above the 100-day SMA.

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