Gold prices initially advanced while the dollar remained largely in consolidation following reports that the International Monetary Fund (IMF) cuts its global economic growth forecasts for 2018 and 2019. The IMF has updated its World Economic Outlook that it was now expecting a growth of 3.7%, down from the 3.9% forecast in July, which is seen as the first downgrade since July 2016.
The current situation which has revealed itself as worsening financial conditions and capital outflows are pressuring the emerging markets, while the mounting trade tensions between the US and its trade partners are also obscuring global economic Outlook. Similar, the fund also reduced its growth outlook for China to 6.2% from 6.4% for the year 2019.
The commodity has retreated by more than 13% since April, with a stronger dollar and an increasing Treasury yields cited as catalysts for the selling. In the final week of September, the Federal Reserve has added 25 bps to bring rates to between 2.0% and 2.25% and has indicated a potential increase in December.
Gold prices are seen trading modestly up during the early US trading session, while some short covering in the future markets and bottom-fishing in the cash markets seems to be in the menu. Global equities were seen trading mixed overnight, with US equities looking for a weaker opening. Global indices are seen shaken by the ruse if government bond yields that are pulling market participants interests away from stocks.
The world’s largest economies continue to escalate their trade war, which has also now turned into a war of words, while the US secretary of state and Chinese foreign minister exchanged harsh words on Monday.
Bullish Outcome: Above 1192.29 Bollinger band, look for further upside with 1195.46 and 1197.70 in extension.
Bearish Outcome: Below 1192.29 middle Bollinger band, look for further downside with 1189.12 and 1186.70 in extension.