Traders Focus on Fed’s Official Comments, Gold Drops but U.S. Budget Deficit Grows

Multiple officials of the Federal Reserve will speak this week, including Fed Governor Christopher Waller, and Chairman Powell. They will elaborate on the Fed’s decision to continue to pause or end their restrictive monetary policy, which included interest rate hikes and balance sheet reductions.

Although the geopolitical turmoil continues to rise both in the Middle East and Ukraine, market participants chose to overlook that instead of a major consensus that the Federal Reserve has ended its rate hikes.

It was the focus of stable interest rates that took gold dramatically lower today with the most active December futures contract trading to a low this morning of $1962.80. As of 4:25 PM EST gold futures are currently down $13 and fixed at $1975.60. Today’s price decline is the result of a combination of market participants taking profits and a slightly higher dollar. Currently, the dollar is up 0.31% and the index is fixed at 105.375 after climbing for the second day in a row.

Add $2.02 Trillion to U.S. Budget Deficit

Gold traded moderately lower amidst a government report that revealed that the budget deficit for the fiscal year ending in September was $2.2 trillion, twice last year’s deficit of $1.38 trillion.

On a technical basis, today’s low of $$1962.80 was just below the top at $1968 that occurred on September 20. Putting the first level of support at roughly $1960 per ounce. Major support for gold remains well above $1900 at the 38.2% Fibonacci retracement, which is currently fixed at $1945.80. Resistance occurs first at the key psychological level of $2000 per ounce, with major resistance occurring at $2021.40 the 61.8% Fibonacci retracement, which is just above the highs of $2019 that occurred at the end of October.

With the current escalation of the war in Israel one could expect gold to find support at recent lows and any correction forthcoming to be shallow and followed by a quick and decisive price recovery.

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Wishing you as always good trading,

Gary S. Wagner