GOLD: Sharp Rebound After Wednesday’s Post-Election Dump

Gold is 0.3% lower in today’s Asia-Pac session, after closing 1.8% higher at $2706.71 following the US FOMC decision. Thursday’s gains partially unwound Wednesday’s losses when the yellow metal fell by over 3% in the aftermath of the US election.

• Yesterday, the FOMC delivered the expected 25bp cut. The Fed has maintained a steady outlook on the economy and rate trajectory since September, emphasising that “nothing in the economic data suggests the committee needs to hurry” toward a neutral stance.
• The FOMC gave away few new signals over the future rate path at the November meeting, with Chair Powell once again emphasising data dependence in setting policy while shrugging off recent volatility in inflation and employment readings.
• Accordingly, rates markets were little changed, with terminal Fed funds rates seen at 3.72% (roughly 86bp of further cuts to come), roughly the same as pre-decision.
• Lower rates are typically positive for gold, which doesn’t pay interest.
• Citi analysts see gold trading weak in the near term but believe that structural drivers remain in place.
• According to MNI’s technicals team, the trend condition in gold is still bullish and a continuation higher would refocus attention on the bull trigger at $2,790.1, the Oct 31 high. On the downside, attention is on a key support at $2,645.4, the 50-day EMA.