The current strength in the precious metal is mainly due to a combination of weaker dollar and the risk-off sentiment that prevails in the financial markets due to a number of concerns, from slowing global growth to the political uncertainty in the US.
Another factor for gold that seems to be emerging now is that the market is taking a step back in the Fed rate hike expectations. In particular, the Fed fund market is now pricing in a nearly 40% chance of a rate cut by the end of 2019. Should the incoming US economic data further point to a slowing growth, the ‘dovish’ outlook will get more entrenched. Such a scenario will play into gold’s hands and could send the metal rally.
In the short term, however, there is a risk of a marginal correction in prices as the bullion has come close to the psychological level of $1.300 which could attract a partial profit-taking. Today, Fed’s Powell speaks in Atlanta . Should he refrain from signaling a pause and sound not as ‘dovish’ as investors expect, the greenback could see a local upside correction. In this case, gold may retreat below $1.292, where buyers will reemerge later.