Why Gold Price Could Move Up After Ongoing Pullback

In 2018, gold had a mixed year. After rising to a high of $1363, the price started to decline. It reached the yearly low of $1163 in October. Since then, gold has been paring those losses and in February, it reached a high of $1345.

The decline in the price in 2018 was mostly because of the Federal Reserve. At the time, the Fed was issuing hawkish statements, which made many to believe that four more rate hikes were possible this year. Starting from October, investors started pricing-in fewer rates this year because the US economy was showing signs of weakening.

This year, the central bank has been largely dovish. The recent statements by the officials indicate that there may not be a rate hike this year. Some in the market are also speculating that the Fed is likely to lower interest rates this year or in the coming year. There are reasons to believe this. This is because the economy is showing signs of weakening and the many investigations going on about Trump could unravel this year. In addition, the coming year is an election year, which could affect the US economy.

When trying to find the value of gold, traders tend to place important value on its relationship with the USD. This is simply because gold is usually quoted in dollar terms. As such, when the dollar increases, gold tends to fall as well. Another reason is that the US is the biggest economy in the world and it has the biggest gold reserves. The country has more than 8965 metric tons of gold, which are valued at almost $400 billion. Therefore, any signs that the economy is weakening is usually viewed as being positive for the markets.

Gold is trading along the $1300 levels, which is slightly lower than February’s high of $1346. Regardless, the XAU/USD pair appears to be in an upward trend that has more room to run. This is confirmed by the fact that the pair is along the 61.8% Fibonacci Retracement level. Therefore, there is a possibility that the price is merely a pullback, which could recover in the coming days.

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