Gold Tumbles – FED Hints December Rate Hike

The precious metal traded exactly as we planned in our previous update Put Your Seat Belts On – Massive Volatility Expected In Gold. The statement remained Hawkish and the metal hit our target at $1297. Let's take a look at the next trade idea.

Fed Fund Rate

The Federal Reserve's policymakers in Federal Open Market Committee (FOMC) agreed to keep its benchmark rate unchanged at 1%-1.25%, forecasting at least one more hike this year.

Balance Sheet

Along sides, the Fed also plans to reduce its $4.5 trillion balance sheet it grew up in order to accommodate the economy in financial crisis. The central bank is expecting to start normalization of its balance sheet in the month of October. That also results in a reduction of money supply in the economy and increases the demand for U.S. dollar.

How It Impacts Gold?

Gold is considered best substitute of the U.S. dollar and investors switch hands whenever there is an opportunity in Gold or USD. That's why the increases value of U.S. dollar diminishes the demand for Gold. Ultimately, investors enter into sell position of Gold and buy the dollar against it.

XAUUSD – GOLD – Trading Levels

Support            Resistance

S1: 1296             R1: 1311

S2: 1291            R2: 1316

S3: 1284            R3: 1324

Key Trading Level: $1304

Gold – Trading Idea

Today, the idea is to stay in sell below $1304 in order to target $1292 with a stop loss above $1306. Good luck.