Gold rallied overnight off the back of the Fed’s commitment to extend its quantitative easing measures. Citing a “more modest” pace of economic recovery than originally anticipated, the FOMC said it would be reinvesting redemptions on its mortgage backed securities into long-term Treasuries, effectively maintaining its US$2tr balance sheet.
Both the Fed’s commitment to maintaining liquidity and its deteriorating growth outlook are broadly speaking bullish for gold, however, a resurgence in dollar strength has once again stymied gold’s advance this morning with spot gold falling below $1,200/oz. Once the dollar stabilizes or weakens again, we expect to see decent buying interest for gold re-emerge Gold support is at $1,194 and $1,184, while resistance is at $1,210 and $1,217.
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