Gold's Directional Bias Remains In Question

 | Jul 14, 2017 01:19AM ET

Key Points:

  • Price action appears ready to recommence a move towards the channel bottom
  • RSI Oscillator rising within neutral territory
  • Watch for an upside move by the metal in the week ahead

Precious metals markets have seen some relatively strong swings in the past few months as the market continues to come to terms with the changing battleground which is monetary policy. Subsequently, gold’s directional bias has been a little difficult to predict as it has regularly changed in response to the level of rhetoric emanating from the FOMC. However, some interesting technical and fundamental factors have appeared which could pave the way for a change in the metal’s direction.

Fundamentally, gold’s price movements have been tightly connected with the Fed’s monetary policy and the past few months have proved relatively negative as the central bank uses the expectation channel to hammer home their desire to raise interest rates. However, the past week has seen much of the speculation of a cycle of tightening start to reverse as the Fed Chair, Janet Yellen, is seemingly backing away from her relatively hawkish rhetoric. In fact, the central banker has been at pains to suggest that she remains ‘Cautiously Optimistic’ whilst at the same time suggesting the Fed is now nearing a neutral interest rate. Subsequently, there is little prospect of successive tightening in the remainder of 2017.