The price of gold fell today to a fresh 7-week low of just above $1190 before bouncing back strongly to trade for a time above $1200. Demand for the safe haven asset was initially already low as virtually everyone was expecting the Eurozone finance ministers to approve the Greek reform proposals for extending its bailout. Indeed, when this was approved the markets barely moved. Then it was over to Janet Yellen, the Federal Reserve chairwoman, to cause some volatility as she testified on the semi-annual Monetary Policy Report before the Senate Banking Committee, in Washington DC. Gold initially fell and the dollar rallied as traders focused on a line of her pre-written opening speech that suggested the interest rate hiking cycle could start at any future FOMC meeting. However they soon realised that, as always, the Fed’s decision will be data-dependant with Yellen suggesting that it is unlikely that the current economic conditions would warrant a rate hike in the “next couple of meetings.” Meanwhile the Conference Board’s closely-watched consumer confidence index fell to 96.4 this month from 103.8 previously, missing expectations of 99.6.
As a result of the consumer confidence miss and Janet Yellen’s overall neutral tone, the dollar lost its entire gains from earlier while the stocks surged to fresh record highs on expectations the Fed will maintain its policy stance for at least the next few meetings. The rallying stock market meant that gold would struggle to push significantly above the $1200 mark. In fact, the yellow metal was trading just below this psychological level at the time of this writing. If it goes on to post a decisive close below here then that would be another bearish development as it would confirm the break of the bullish trend line that is visible on the daily chart. That said, the downside may be limited going forward. As can be seen on the weekly (chart in figure 2), gold is now heading towards a major support area between $1155 and $1180. The lower end of this range corresponds with the 61.8% Fibonacci retracement level of the upswing from the 2008 low, while the upper end is the key long-term horizontal support.