GOLD PRICE BOUNCES BACK AS FED PREPARES OUTCOME-BASED FORWARD GUIDANCE
The price of gold rebounds from a fresh monthly low ($1873) as the Federal Open Market Committee (FOMC) Minutes warn of a protracted recovery, and the central bank may gradually change its tone ahead of 2021 as “most participants supported providing more explicit outcome-based forward guidance.”

It remains to be seen if the FOMC will adjust the forward guidance at the next interest rate decision on November 5 as US President Donald Trump tweets that “immediately after I win, we will pass a major Stimulus Bill,” and the Fed may stick to the same script ahead of its last meeting in December as the central bank vows to “increase its holdings of Treasury securities and agency MBS (mortgage-backed securities) at least at the current pace.”

However, in a recent speech, Boston Fed President Eric Rosengren warns that “the slow build-up of risk in the low-interest-rate environment that preceded the current recession likely will make the economic recovery from the pandemic more difficult,” and goes onto say that “if we expect to remain in a low-interest-rate environment for a protracted period of time, we need to take more precautions against financial stability risks for when the next economic shock hits.”

The comments suggest the FOMC will continue to rely on its current tools to support the US economy even though Chairman Jerome Powell and Co. plan to “achieve inflation that averages 2 percent over time,” and it seems as though the FOMC is in no rush to deploy more non-standard measures as most Fed officials judged that “yield caps and targets would likely provide only modest benefits in the current environment.”

GOLD PRICE DAILY CHART
The price of gold pushed to fresh yearly highs throughout the first half 2020, with the bullish price action also taking shape in August as the precious metal tagged a new record high ($2075).

However, the bullish behavior failed to materialize in September as the price of gold traded below the 50-Day SMA ($1939) for the first time since June, with developments in the Relative Strength Index (RSI) negating the wedge/triangle formation established in August as the oscillator slipped to its lowest level since March.

The decline from theyearly high ($2075) may turn out to be a change in trend as the RSI continues to track the downward trend carried over from August, but the indicator may show the bearish momentum abating if it clears trendline resistance following the failed attempt to push into oversold territory.

Until then, the price of gold may consolidate amid the string of failed attempts to break/close above the $1907 (100% expansion) to $1920 (161.8% expansion) region, with the Fibonacci overlap around $1847 (100% expansion) to $1857 (61.8% expansion) back on the radar as it lines up with the September low ($1849).

Need a break/close the overlap around $1907 (100% expansion) to $1920 (161.8% expansion) to open up the $1956 (23.6% expansion) region, with the next area of interest coming in around $1971 (100% expansion) to $1985 (261.8% expansion).

Reference by: David Song, Currency Strategist