Gold Rejected at MAs Initially But Comes Back Up As USD Weakness Prevails
The 100 and 200 SMAs rejected gold earlier today, but it has returned back up as the USD continues to remain weak
Gold has been bearish since early March after it peaked above $2,000 and fell to $1,600 lows, but reversed course to trade higher after the USD turned bearish on a slowing US economy. The fall in contraction in services and manufacturing activity on Monday fueled expectations that the FED would soon slow the pace of its interest rate hikes or stop them altogether.
Last Friday we heard the San Francisco FED president Mary Daly, who makes comments on behalf of Jerome Powell, saying that there might be a time to slow with rate hikes. That sent the USD crashing lower and XAU/USD bounced off the support zone around $1,615 and has gained around $50 so far.
Gold H4 Chart – MAs Holding As Resistance for Now
Will we see a bullish breakout or a reversal lower?
But, the 100 SM (green) and the 200 SMA (purple) held as resistance in the first attempt, rejecting Gold and sending it lower. Although buyers have come back and Gold is back up again. GOLD has turned into a risk asset after losing its safe haven status and should have been going down on lower economic growth expectations, especially when the global economy is expected to fall into a recession.
So, the main reason for the improvement in the risk sentiment currently is the fact that despite the FED being widely expected to deliver a rate hike of 75 bps in November, it is also debatable how much higher it can safely push interest rates and therefore the borrowing costs.
Mortgage payments are going through the roof because of the central bank tightening, and rate hikes are not even helping with inflation, which is a result of price hikes from major corporations, whose profits have also gone through the roof this year. Although, once interest rates are stable and it becomes clear that the global economy is in recession, the sentiment will turn bearish again and Gold will turn lower.
Gold XAU Live Chart
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