Gold Falls Towards $1,300 Support

Today we get the minutes from the most recent Reserve Bank monetary policy meeting. Traders are now pricing in the start of a rate tightening cycle by the RBA in 2018 which is expected to be reinforced by these minutes. With central banks from the major developed economies now either beginning or intending to soon begin their rate hiking cycles the pressure will begin to mount on the RBA to follow suit. For now, the AUD is still strong relative to the US dollar, holding just below US$0.80, which does provide the RBA some breathing room.

Gold prices continue to pull-back from recent highs with the price falling to $1,308 overnight. The $1,300 level is likely to provide support as it was formerly a major resistance level when gold was attempting to break above it. The resumption of the stock market rally in the US appears to signal that all-is-well again and safe haven flows into gold have therefore reversed. Both the Dow Jones and S&P500 made new highs last night continuing the steady uptrend that has been in place all year.

The main focus for the week is still the FOMC meeting and press conference which will occur early Thursday morning Australian time. The press conference will be a chance for the Fed to explain its intentions regarding reduction of its balance sheet. At this stage, markets are expecting the beginning of this run-off process to be announced at this meeting. Odds of another rate hike this year have increased over the last month with the CME rate tracker tool suggesting a 55% probability of a rate hike before the end of the year, up from 37% just a month ago.         

Data Release:

–    AU Monetary Policy Meeting Minutes 11:30am AEST

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This article was written by William O'Loughlin – Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via william.oloughlin@rivkin.com.au or by phoning +612 8302 3633.