In the last year, the green bucks gained its strongest bullish momentum in the market after the FED hike their interest rate on the basis of 25 points in the global market. Before that, the first initial bullish momentum was started in the green bucks during the U.S presidential election held on 8th November 2016.The newly elected president Mr. Trump stated that they are going to increase the fiscal spending and the inaugurate tax cut policy and such an optimistic statement gave the dollar a strong bullish momentum in the market. Since the price of gold is measured in a dollar a slight variation in the value of the green bucks significantly affects the gold market. On that, even the green buck tested a critical support level in the market and traded at 1046.65.However, from that level, the price of gold started its bullish run in the market as the market absorbed some of the intense bullish hit of the mighty U.S dollar. Most of the professional traders went long at that critical support level with bullish price action confirmation signal and they have already booked their profit in the market.
Gold tumbles after hitting critical resistance level
The price of gold rallied high in the global market after hitting the critical support level at 1046.65 in the market. However, in the last week, the price hit a critical resistance level at 1206.29 and tumbled for the first time in 7 weeks. Before the recent slip of the gold, trading CFDs was a lot easier as most of the traders went long at the critical support level. The price of gold went down by 0.31 % on the New York Mercantile Exchange and traded at $1196.15.In the last Thursday, the February contract ended with 0.22% loss as the price of the precious metal was $1130.70 an ounce. Most importantly the dollar gained a strong bullish momentum in the market as FED chairperson Janet Yellen stated that their economy is doing well and they are most likely to see more outstanding performance in the near future. If the U.S dollar retain is an ongoing performance in the global economy then there is strong chance that we will see strong bearish run in the gold market. The average hourly income of the U.S economy has also increased and the consumer sentiment is also positive. To be precise the dollar is steadily gaining strength in the market and imposing a threat to the gold bulls.
Failed political statement
As the newly elected president of the U.S government Mr. Trump has stated that they are going to increase the fiscal spending an implement lower tax to their citizen. Upon the release of such optimistic statement, all the professional traders were overly cautious in trading CFDs. Though there many different instruments in the global market but the cfds market tends to react violently to major political opinion. However, Mr. Trump has failed to keep his promise and he has not yet been able to increase the fiscal spending in his country. The leading economist researchers are now thinking that the dollar will be under extreme pressure if the current consumer sentiment turns negative due to this recent failure. Moreover, the tax cut policy has not yet been implemented and consumers are showing a sign of dissatisfaction which is directly affecting the value of the green bucks. Though the green buck was supposed to tumble in the global market on such failure but it still remains supported as the economy is showing significant improvement in most of its major sectors. Investors are now cautiously looking at the different trading assets to find the best suitable pick which will help them to trade the market with low-risk exposure.
Possible three rate hike in 2017
In the last FOMC meeting minute the FED have raised their interest rate on the basis of 25 points and made the dollar significantly stronger in the global world. Most of the traders involved in trading CFDs went overly cautious as FED chairperson Janet Yellen stated that they are going for possible three rate hike in the Year 2017.Since the price of gold is measured in U.S dollar such an important event like interest rate hike decision is going to affect the gold market severely.Though the gold market is now greatly supported by the critical support level in the market but if the FED manages to go for a rate hike as planned then we will see a new historic low in the price of gold. Most importantly the central bank is also going to pressurize the FED for at least two rates so that they can adjust the inflation rate. But the FED will be extremely careful about their rate hike decision since an immature rate hike will significantly weaken the U.S economy in the long run.
Summary
The price of gold started its bullish rally in the market after the market hit the critical bottom. Due to the recent slip of the U.S dollar index from its 14 years high the price of gold rallied hard in the market. Most of the professional traders are now worrying about this recent bullish movement since the U.S economy is doing significantly well. If the FED manages to hike their interest rate in this year than the gold bulls will have a tough time in the market. Due to the recent slip of the gold price, most of the professional traders are now staying on the sideline for the better trading opportunity.