Daily Brief, Sept 18 – Everything You Need to Know About Gold on Friday!  

Posted Friday, September 18, 2020 by
Arslan Butt • 2 min read

Happy Friday traders,

Prices for the precious metal GOLD closed at 1,943.99, after placing a high of 1,960.91, and a low of 1,932.76. Overall, the movement of gold remained bearish throughout the day. On Thursday, gold prices fell, after the Federal Reserve announced that US interest rates were likely to remain near zero for another three years. Instead of weighing on the local currency, this pledge ended up benefitting the dollar instead. The Federal Reserve did not announce any additional stimulus plan.

Wall Street’s benchmark S&P 500 index dropped by 0.5%, after the Fed announced that it will not raise its interest rates until inflation reaches 2%. According to the Central Bank projection, inflation is not likely to reach 2% until late 2023. According to the Chairman of the Federal Reserve, Jerome Powell, the Fed will not lose sight of the million Americans who remain out of work; however, he did not provide an indication of any new stimulus. Markets were expecting some clues about the stimulus plan, but they were disappointed, and this raised the negative market risk sentiment, weighing on the prices of the yellow metal.

Most of this year’s losses have been recovered in the global markets, boosted by the credit infusions that central banks have pumped into struggling economies, and hopes for a coronavirus vaccine. The Fed has predicted that the economy will shrink by 3.7% this year, which is an improvement on the June outlook of 6.5 in contractions. The Fed projected an Unemployment Rate of 7.6% at the end of the year, against the previous prediction of 9.3% in June.

Powell said that a full economic recovery was unlikely until people were confident that it was safe to re-engage in various activities. The US investors are keenly waiting for Congress to announce a new support package, after additional unemployment benefits, which help to support consumer spending, expired; however, the Republicans and the Democrats are still in a deadlock regarding the size of the package.

Meanwhile, on the data front, at 01:00 GMT, the TIC Long-term Purchases figures from the US showed a drop to 10.8B from the projected 109.3B, weighing on the US dollar. At 17:30 GMT, the Philly Fed Manufacturing Index figures remained flat, achieving the expectations of 15.0. The Unemployment Claims from last week rose to 860K, compared to the projected 825K, putting pressure on the local currency. The Building Permits also dropped to 1.47M, against the projected 1.51M. The Housing Starts fell to 1.42M, compared to the expected 1.47M, putting pressure on the greenback.

The poor economic data from the US failed to reverse the gold prices, as the focus shifted to the Fed’s decision, which only strengthened the US dollar; as a result, gold dropped.

Daily Technical Levels

Support              Resistance

1,939.49              1,968.99

1,924.42              1,983.42

1,909.99              1,998.49

Pivot Point:       1,953.92

GOLD is trading with a bullish bias at the 1,952 level, and a bullish crossover at the 1,949 level exposes gold’s upward movement until the 1,955 level. On the higher side, a bullish crossover of 1,955 could lead gold prices towards the next resistance level of 1,961. At the same time, the support level remains at 1,942. A bullish bias seems dominant today.

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