The recovery of the US currency amid risk-off markets is putting the brakes on the gold price increase, which has now been knocked out of commission for the second time in a row, according to the World Gold Council. Before the release of the important US Q3 GDP statistics due later this week, investors are liquidating their USD short positions and repositioning themselves.
Furthermore, rising global inflationary pressures, as well as the possibility that they will have a detrimental influence on the economic revival, are driving safe-haven demand for the USD at the expense of gold. Rising US Treasury yields, on the other hand, could assist in keeping the gold price stable.
Key Levels To Watch In The Gold Price
XAU/USD CHART Source: Tradingview.com
With the help of the Technical Confluences Detector, we can see that gold is headed south to test the $1784 demand region, which is formed by the junction of the one-hour SMA200 with the one-day SMA10 and the four-hour EMA50. Sellers will need to establish a strong foundation below $1781 to extend the subsequent decline. That level corresponds to the convergence of the Fibonacci 61.8 percent one-week and pivot point one-day S1 levels on the Fibonacci scale.
Further downstream, the SMA100 four-hour, which sells for $1777, may be able to save the day for the buyers. At $1772, the Bollinger Band one-day Middle becomes the next significant support level. Conversely, gold bulls will face a quick supply push at a thick concentration of strong opposition levels near $1793, where they will face an immediate supply push. In that region, the SMA5 one-day, SMA200 one-day, Fibonacci 38.2 percent one-day, and Fibonacci 61.8 percent one-month all coincide.
The next target for gold bulls is $1799, which represents the intersection of the Fibonacci 61.8 percent one-day and SMA50 one-hour moving averages. The Fibonacci 23.6 percent one-week at $1801 will be critical for gold bulls to beat in the short term.
Review Of The Fundamentals
After failing to hold higher levels, gold fell about 1% on Wednesday, undoing this week’s gains. Despite the positive market sentiment and dropping Treasury yields, rising US dollar demand hampered gold’s appeal. The Greenback benefited from the enthusiasm over the US stimulus efforts, as well as an unanticipated rise in consumer sentiment and improved home sales statistics.
Notwithstanding rising inflation conditions, positive US statistics lent credence to the Fed’s reduction next month. Solid US corporate financial results boosted Wall Street indices to new highs, adding to the risk-on market sentiment that slowed the relatively secure Dollar’s gain and supported the gold price. Gold is steadily declining ahead of crucial monetary authority monetary policy meetings and key US economic data on Wednesday, as the US greenback holds onto early gains and Treasury rates across the curve rise.
The continuous growth in world inflation is boosting expectations for fiscal policy tightening sooner than planned, raising rates. With the overall number expected to fall to 1.1 percent in September from 1.8 percent in August, the gold price brushes off the risk-off mentality. The US macro data will impact dollar trades and so gold prices. The Bank of Canada (BOC) policy meeting is the primary event risk this week, followed by the US Q3 GDP data and the European Central Bank (ECB) announcement.