Good morning traders,
Prices for the precious metal GOLD rose on Wednesday, reaching the highest level in 11 days, amid bets on dovish monetary clues from the US Federal Reserve. Gold prices began gaining traction in the market, on the back of rising expectations that the Federal Reserve will become more dovish than in the past. Market traders were placing bets on the realization that the inflationary pressure was more than projected.

In its August FOMC meeting, the Fed moved from the focused 2% inflation target to an average inflation target of 20%, which means that it is willing to accept overshoots before raising rates again. Jerome Powell has already said that the central bank will not think about raising interest rates until the COVID-19 crisis is under control, which means that the prevailing 0-0.25 interest rate regime will remain in place for a year or even longer.

Investors believe that although the Fed does not necessarily have to announce stimulus measures, they will have to lay the groundwork for potential stimulus later on. The ongoing September meeting is the first since the central bank took a more relaxed inflation stance last month. The policy announcement will be followed by a news conference by Chairman Jerome Powell half an hour later.

The lower interest rates tend to weigh on bond yields and the dollar, while they bolster the demand for non-yielding gold, which is also used as a hedge against inflation and currency debasement. Therefore, gold surged on Wednesday. Furthermore, on the data front, at 17:30 GMT, the highlighted Core Retail Sales data from the US dropped to 0.7%, against the expected 1.0%, weighing on the US dollar. In August, the Retail Sales also dropped, falling to 0.6%, compared to the projected 1.1%, which put additional pressure on the US dollar. This negative macroeconomic data from the US weighed on the local currency, and lent support to the upward movement in the prices of the yellow metal.

Meanwhile, due to the rise in tensions between Washington and Beijing, some of the biggest Chinese technology firms are expanding their Singapore operations. Tencent and Alibaba have increased their presence in the state, while TikTok owner ByteDance was reported to be investing billions of dollars. Singapore is considered as a neutral territory, as it has good ties with both China and the US.

Moreover, the Federal Government of the US outlined a sweeping plan on Wednesday, to make COVID-19 vaccines available for free to all Americans. The federal health agencies and the Defense Department have sketched complex plans for a vaccination campaign to begin gradually in January or later this year. This raised the risk sentiment and helped cap further gains in gold prices. On Wednesday, US President Donald Trump urged Republicans to embrace a larger coronavirus package, as a top White House aide showed more optimism about striking a deal with the Democrats. This raised hopes that consensus will now be reached between the parties regarding the size of the stimulus package, and that it will be announced soon. As a result, the US dollar came under fresh selling pressure, pushing gold prices onto the upside.

Daily Technical Levels
Support              Resistance
1,957.20             1,983.80
1,943.90             1,997.10
1,930.60             2,010.40
Pivot Point:       1,970,50

Gold prices fell sharply, from 1,959 to 1,940, holding above support areas of 1,936. The triple bottom pattern on the hourly timeframe is likely to support gold prices today at 1,936. Above this, a bullish bias could drag gold prices higher, to the 1,949 level, and above this, the 1,958 level may work as a resistance. Violation of the 1,936 level could extend the selling bias until the 1,924 area today. Good luck!