Feb gold futures have once again, had a big reason to rally and did not seem to follow through going into today. If you look at the Feb contract this morning, we are trading down almost $9 following a quite bullish speech from Fed chair Jerome Powell. In his speech this week, he had indicated that the Fed in short might be a little slower and cautious with their rate hikes as we go into 2019. The market has all but priced in another rate hike before the new year in December. In theory, this should have bearish effects on gold, and bullish effects on the U.S. dollar index as investors seek a stronger interest-bearing asset. I believe that gold has plenty of room to run from here as the fed could seek a slower path to rate hikes in 2019.
It’s worth noting that Feb gold has been a very choppy, sideways trend for the past several months and there is a pretty big element missing to the gold trade, geopolitical tension. North Korean missiles have been stopped, tensions in the South China sea have been subdued, and there have not been many other areas of turmoil in the world recently. If there isn’t a deal at the G20 meeting this weekend, I would imagine that China will no longer help with the North Korean threat and that’s certainly something to at the very least consider when looking at gold to the upside. I believe that with the chance of rate hike slowdowns, North Korean tensions increasing once more, and a recently shaky stock market there are more reasons than in recent months to position long in the gold market.
Gold Feb ’19 Daily Chart