We feel that given gold’s inability to rally significantly, despite dovish comments from New York Fed president Bill Dudley, we could take the sell limit down to $1335 – just under the 38.2% retracement of the rally from $1180 to $1433. Our potential stop stays at $1378.
Bill Dudley is a core member of the Fed and therefore carries significant weight on the Feds board and his comments that the US economy still needs the support of very accommodative policy, given he needs to see evidence that the labour market improvement will continue, were positive for gold. It is also clear that while the Democrats and Republicans jostle over potential fiscal spending and tax concessions the Fed will provide continued support from a monetary perceptive, in case of a worst case scenario.
In upcoming US trade we get narrative from Ester George and Sandra Pianalto; however the topics of discussion are not centred on monetary policy and therefore shouldn’t provoke too much reaction around tapering. We also get reads on consumer confidence and US house price readings, which could influence gold if stronger than expected, given both metrics are influenced by higher bond yields; a situation the Fed is extremely cognisant of.