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Gold prices continued to surge higher during this week, following up on the upward momentum created from previous sessions in mid-March 2019.

The precious metal has reacted and will continue to react to significant financial and geopolitical events, somewhat dividing analysts as to its further direction which of course provides the opportunity for us to make an in depth investigation.

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During the previous days leading up to the FOMC meeting on Wednesday the market positioned itself for a dovish statement by the FED.

In previous meetings the FED kept a rather passive stance towards its observations on the US economy.

Gold was able to capitalize from the FED’s wait and see stance with its value slowly increasing from a low point of $1,176 reached in the previous August peaking at around $1,343 in the previous February.

This was not done, all at once and the precious metal had some downfalls but was able to keep up its surge due to rates not rising as expected, as the shiny metal tends to move higher when rates remain constant.

This was the result of the FED’s dovish position on the economy since the start of 2019, bringing us to the present moment.

Analysts are now making a case for the opposite scenario to take place as the “wait and see position” has started to send messages of doubt for the US economy, from their viewpoint.

Some very simple reasons as to this opinion is the FED’s hesitation to proceed as initially scheduled , while weaker economic growth is expected in the US but also on a global scale.

If this opinion is by any means validated or has some sort of evidence to support it, Gold prices could be heavily boosted and the precious metal could climb to high levels that surpass high levels reached in 2018, exceeding $1,360 per ounce.

FED won’t rate hike in 2019?

On the same subject but from a different angle, various reports from research analysts, indicate that due to the FED choosing not to maintain its rate hike path formed in 2018, the US could have the effect of an increasing inflation rate set forward for the following months.

We must note that until now and according to the previous US CPI rate released for February 2019, a reduction of the figures has been displayed on a year to year reading but an increase was observed on a monthly basis.

This provides a mixed picture for the US inflation rates but also provides some ground for more analysis to take place.

To be clear, various articles confirm that Gold volatility could be related to changes in Inflation rates and that the precious metal can be used as a shield to protect investors against the negative effects.

According to a research enacted in the US, Gold turned out to be an exceptional hedge instrument against inflation for the entire time frame examined which was over 6 years and was measured in both, the bull and bear market.

This research was based on a series of probability distributions.

Yet, in some cases Gold followed up with negative values during this research indicating that Gold prices and Inflation can move together in the opposite direction but in other cases, Gold does not seem to follow inflation and so the relationship does not exist always and in all cases or countries.

A person living in Europe using the EUR or GBP may need to approach inflation with partial Gold trading, combining it with
bond yields or equities.

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Gold is sensitive to geopolitical risk

To conclude with, when it comes to Gold, traders should be aware that the precious metal is tremendously sensitive to geopolitical risk, which could be the main reason behind Gold holding up over the $1,300 round number even as the US dollar has been getting more expensive simultaneously.

Starting with Brexit, following with Iran in the Middle East, then North Korea and Venezuela, have all contributed at some extent to holding Gold prices high.

So Gold prices may not depend on the USD solely after all.

Gold Technical Analysis

In a buying momentum we could see Gold breaking above the (R1) 1306.67 resistance barrier and heading even higher for the (R2) 1310.71 resistance level.

Even higher the precious metal could reach the (R3) 1315.19 resistance barrier.

In the opposite direction if Gold drops to a selling momentum we could see it breaking the (S1) 1301.92 support level and heading even lower for the (S2) 1295.30 support level.

Even lower we could see the precious metal dropping to the (S3) 1289.33 support barrier.

The shiny metal could also move in a sideways movement between the (R1) 1306.67 resistance barrier and the (S1) 1301.92 support level.

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