Gold Price Dynamics: A Technical Downturn Amidst USD Resilience and Market Speculation
For a second consecutive day, the price of GOLD (XAU/USD) is on the decline, inching closer to the month’s low in the Asian trading hours of Tuesday. The catalyst behind this downtrend is the resurgence of the US Dollar, rebounding from its September 20 nadir, which in turn diminishes the allure of the precious metal. Additionally, the absence of escalations in the Middle East conflict appears to redirect investment flows away from gold.
Nonetheless, the potential for an expanded crisis in the Middle East, coupled with pervasive economic uncertainties, remains a backdrop that could provide some buffer to gold prices. Further support may come from a downturn in US Treasury bond yields, spurred by growing consensus that the Federal Reserve is approaching the end of its interest rate hiking cycle. Such developments suggest that traders with short positions should proceed with caution.
With no significant economic news from the US due on Tuesday, all eyes are set on upcoming speeches by prominent FOMC members, including Fed Chair Jerome Powell later in the week. Market participants are poised to dissect these addresses for hints on the trajectory of future rate hikes, which will significantly influence USD strength and, consequently, gold’s direction.
Uncertainty surrounding the Federal Reserve’s forthcoming policy decision has initiated a short-covering in the US Dollar, putting additional pressure on gold prices. The tepid US jobs report from last Friday bolsters the viewpoint that the Fed might pause rate adjustments in December. Statements from Fed officials, including Governor Lisa Cook and Minneapolis Fed President Neel Kashkari, further inform market sentiment by offering insights into the central bank’s inflation targets and economic resilience assessments.
Investors are now awaiting further guidance from FOMC figures and will pay close attention to Jerome Powell’s insights. Concurrently, a retreat in US Treasury yields amid speculation of the Fed’s rate hike cessation, combined with the ongoing risks in global hotspots and economic uncertainties, could offer some reprieve to gold prices. In the international context, China’s trade balance deterioration and a notable drop in exports signal a cooling of global demand, which may also impact market dynamics.
Technical Outlook for Gold
The technical analysis of GOLD prices suggests a bearish momentum as prices break below the EMA50 and form what appears to be a double top pattern on the chart. This pattern supports the forecast for a continued corrective bearish trend, with an initial target at 1962.35. A breach of this level could lead to a further descent to 1933.30.
Maintaining levels below 1988.00 is critical for the bearish outlook to prevail. Conversely, a move above this threshold could signal a reversal and the possibility of a recovery, potentially reinstating the primary bullish trend.
The trading range anticipated for today is between the support level of 1956.00 and the resistance level of 1985.00, with the trend for the day expected to be bearish.
Gold XAU Live Chart
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