By IFCMarkets

Gold had been advancing as dollar weakened with lower expectations of a rate hike this year. Chances of a rate hike this year grew even smaller after Federal Reserve lowered the pace of rate hikes in 2017 and 2018 at June policy meeting and Janet Yellen mentioned the Brexit as a downside risk to US economic outlook. Increased uncertainty for global economic outlook after Brexit boosted the appeal for haven metal further. Will gold continue rising?

Gold price has gained 24.76% since the start of 2016 as Federal Reserve adopted a cautious stance on monetary tightening after the first interest rate hike in over nine years in December 2015 and plans to hike rates four time in 2016. The selloff in global equities in the beginning of 2016 and slower US growth rendered Fed’s plans for aggressive monetary tightening in 2016 infeasible as inflation rates of around 1% stayed well below the Fed’s 2% target level and employment growth moderated. The Federal Reserve left the rates unchanged at June 14-15 meeting after disappointing May jobs report and lowered expectations for the pace of rate hikes to three interest rate increases in 2017 and 2018 instead of four hikes in both years. It also lowered its 2016 economic growth outlook to 2% from 2.2%. The Fed Chair Janet Yellen said at press-conference following the Fed meeting that the decision to leave the rates unchanged was supported also by Brexit concerns. The UK decision to leave the European Union worsened global growth outlook and increased demand for haven assets including gold. It gained 4.8% on Friday on added Brexit uncertainty. It is not likely the Fed will implement even one rate hike this year, CME Group’s FedWatch tool indicates currently markets are pricing a 7.2% likelihood of a rate cut in July at Fed’s next policy meeting instead of a rate hike, with zero percent likelihood of a rate hike in remaining other three policy meetings this year. Today May personal income, spending will be released at 14:30 CET and personal consumption expenditure index will come out at 15:30 CET. A negative surprise in the readings will be bullish for gold. On July 1 at 16:00 CET June ISM Manufacturing PMI will be published and June ISM Non-manufacturing PMI will be released on July 6. Both are expected to rise which will be bearish for gold.

On the daily timeframe XAUUSD: D1 has been trending upward since mid-December 2015. It had been correcting downward after hitting a 21-month high the next day following June 15 FOMC interest rate decision. The price hit over two-year high on Friday, closing above the fractal high. The Parabolic indicator gives a buy signal. The Donchian channel is tilted upward indicating uptrend. The RSI oscillator is near the oversold zone and is edging lower. The MACD indicator is above the signal line and zero level, which is a bullish signal. We expect the bullish momentum will continue after the price closes above the fractal high and upper Donchian bound at $1358.58, which may serve as a point of entry. A pending order to buy can be placed above that level. The stop loss can be placed below the last fractal low at $1250.53 confirmed also by the lower Donchian bound and Parabolic signal . After placing the order, the stop loss is to be moved every day to the next fractal low, following Parabolic signals. Thus we are changing the probable profit/loss ratio to the breakeven level. If the price meets the stop loss level ($1250.53) without reaching the order ($1358.58), we recommend cancelling the position: the market sustains internal changes which were not taken into account. The

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