The new trading year has created a fresh buying pressure in the gold and traders are now overly cautious about the next move of the market. In the last year, the gold market fell dramatically during the event of the U.S presidential election held on 8th of November 2016.Mr .Trump become the newly elected president of United States of America and pushed the dollar higher in the ground. In a press conference, he stated that the U.S government is going to implement tax cut policy and increase the fiscal spending from the very beginning of the next year. This created an extreme level of positive awareness in the U.S consumer and helped the green bucks in its bullish rally. The second boost in the green bucks was triggered by the FED in the last FOMC meeting minute as FED hike their interest rate on the basis of 25 points. Since the price of gold is measured in a dollar a slight variation in the value of the U.S dollar index greatly impact the gold market. If you are trading forex then you know very precisely that how heavy the interest rate hike decision can be in the global market.
Three consecutive week gain in the precious yellow metal: The green bucks showing an extreme level of strength in the global market but lost most of its bullish momentum when the U.S dollar index slipped from its 14 years high. On that event trading, trading forex industry was extremely difficult since most of the investors were in a doubt about the next movement of the financial instrument. On last Wednesday the gold price has secured a three weekly gain in the market after breaking the critical resistance level at 1120.80.This level was going to provide a significant amount of selling pressure to the gold market but most of the professional traders remained on the sideline to see if the resistance level at that level restricts the bullish movement of the gold price. According to the Comex division of the New York Stock Mercantile Exchange, the dollar gained near about 0.2% and traded at $1163.65 a troy. However, in the previous day, the gold market has secured a significant level and traded at $1166.00 level, which is one of the most significant levels for the traders as the price has not traded in such a high since December 14.Those who are involved in forex trading is considering this movement as a strong bullish reversal signal in the market.
Slip of dollar index: The U.S dollar index is one of the most crucial tools that every trader look while trading forex. The U.S dollar index measures the overall strength of the green bucks in contrast the major six currency pairs. Most of the professional gold traders look at this index to trade the gold in the market since it has a negative correlation with the gold market. When the price of gold moves downward the U.S dollar index goes up and vice versa. The gold market gained its first bullish momentum in the market from its critical support level after the U.S dollar index slipped from its 14 years high. The U.S dollar index secured a record high in the market at 103.82 but from that level, it dropped by 0.2% and traded at 103.82 level. In the eyes of trained professional, the U.S dollar index might participate in a free fall in the near future and will help the gold bulls in the market. Most of the leading investors are thinking that the market has already absorbed the bullish sentiment of the green bucks and in order to push the green bucks higher the FED needs a rate hike as soon as possible.
Dollar still remains broadly supported: The price of gold is rallying high in the market after it hit the critical support level at 1112.27.Technically this level is extremely crucial for the traders since most of the expert are thinking that there will be a strong bullish reversal in the price of gold from this level. The first initial bullish target for the gold market is now at the critical resistance level at 1180.64.However, the professional gold traders are overly cautious about the recent bullish move in the gold market since the FED has projected three rate hike in the year 2017.This projected three possible rate hike by the FED has been providing strong support to the dollar bulls in the global economy. Most importantly the U.S central bank will also create pressure to the FED for at least two rate hike before the month November so that they can adjust the current inflation rate of their economy. Though the U.S economy is doing significantly well in the global market but most of the leading economist are overly cautious since three rate hike in a single year will be extremely difficult for the FED. Most importantly and immature rate hike will significantly weaken the U.S economy in the longer time frame.
Summary: The price of gold is trading higher in the global market after hitting the critical support level at 1112.27.Most of the professional gold investors went “long” with the bullish price action signal in the market and the leading investors are thinking that there will a strong rally in the near term future. Though the gold market is technically bullish in the global market but the dollar still remains broadly support. So while trading the gold market proper risk management should be strictly followed.