Good morning fellas,

Prices for the precious metal GOLD closed at 1,863.12, after placing a high of 1,905.28, and a low of 1,855.61. Overall, the movement of gold remained bearish throughout the day. On Wednesday, gold prices dropped, extending their losses for the 3rd consecutive day, as they headed towards the lowest level since Sept 22. The declining gold prices are due to the strong US dollar, as investors wait for a further response from major central banks at this time of economic uncertainty.

The US Dollar Index rose above 94.21 on Wednesday, to an 8-week high, weighing heavily on the prices for the yellow metal. The strong comeback of the US dollar was due to the rising concerns about the second wave of the coronavirus in Europe and doubts over the next round of US stimulus measures from the Federal Reserve and Congress.

As the US Congress has failed to pass the fifth round of US Stimulus measures, the risk of a longer and slower recovery of the economy has risen, and this has raised the risk-off market sentiment, providing continuous support for the safe-haven greenback, rather than gold.

Furthermore, the risk-off market sentiment was supported by the latest flare-up between the US and China, over the spread of the coronavirus. On Tuesday, the tensions between the two nations escalated when US President Donald Trump blamed China for the spread of the coronavirus pandemic all over the world, during a speech at the Annual General Assembly of United Nations, which was held in New York.

He called for holding China accountable for having unleashed the coronavirus on the world. In response to this, Beijing accused Trump of lying and abusing the UN platform to provoke a confrontation. In his speech, Chinese President Xi Jinping said that China had no intention of entering into a Cold War with any country.

Meanwhile, during his testimony, Fed Chair Jerome Powell faced many questions regarding the next round of the stimulus measures. On Wednesday, Powell referred to the ongoing dispute between the Republicans and the Democrats, over the size of the stimulus package, with just six weeks to go until Election Day. However, lawmakers were not satisfied and kept asking about the Fed’s role in helping small businesses, beyond the scope of their current emergency lending program.

They pushed Powell to urge large companies that receive help from the bank to hold onto as many employees as possible. This also weighed on the market sentiment, and gold prices fell below the 1,900 level. On the data front, at 18:00 GMT on Wednesday, the US Housing Price Index figures that were released showed a rise to 1.0% from the projected 0.4% in July, lending support to the US dollar. At 19:45 GMT, the Flash Manufacturing PMI figures from the US showed an expansion in the industry, with 53.5 points in September against the predicted 52.5, boosting the US dollar and resulting in further losses in the gold prices. The Flash Services PMI also rose to 54.6, against the anticipated 54.5, supporting the US dollar. The USD, which was already up because of its safe-haven status, was again supported by the upbeat economic data, weighing further on the prices for the yellow metal on Wednesday.

Daily Technical Levels

Support              Resistance

1,852.8000         1,868.9000

1,846.3500         1,878.5500

1,836.7000         1,885.0000

Pivot Point        1,862.4500

On the technical front, the XAU/USD is trading with a strong bearish bias at the 1,858 level. In the daily timeframe, gold has violated the descending triangle pattern, extending support at the 1,911 level, and now it is working as resistance. On the lower side, gold may find support at the 1,841 level, and above this, it could bounce off. The leading indicators, such as MACD, also suggest a selling bias in the precious metal. Let’s go for selling trades below the 1,862 level today. Good luck!