Oct 23, 2022
VOT Research Desk
As demand for the American Dollar restarted mid-week amid a risk-averse atmosphere, spot gold dropped for a second consecutive week and came close to a two-year bottom of $1614.81 per troy ounce on Friday.
The macroeconomic calendar was sparse, and sentiment drove financial markets. Political unrest in the UK added some spice to an otherwise tranquil week.
Liz Truss, the prime minister of the United Kingdom, announced her resignation on Thursday after 44 days in office. Another leadership competition would be held the following week, the 1922 Committee stated right afterwards. Truss’s botched mini-budget, which included tax cuts and a budgetary gap of almost £60 billion, was the cause of the political crisis.
The UK government crumbled despite efforts by the Chancellor of the Exchequer, Jeremy Hunt, to spare Truss’s head by rolling back some of the policies.
Additionally, in September, the UK Consumer Price Index increased by 10.1% YoY, with the core annual number rising by 6.5%. As the EU and Canada also issued their CPIs, demonstrating that central banks’ quantitative tightening is not significantly lowering prices, higher inflation levels were to blame for the market’s turbulence.
GBP/USD Technical Analysis:
The weekly chart of XAU/USD demonstrates that the risk is still tilted to the negative. The yellow metal has recently been trading below a crucial Fibonacci resistance level at $1,658.50, which represents the 61.8% retracement of the increase from $1,614.81 to $1,729.54.
While the 20 SMA is solidly going south and above the present level, the metal is still developing well below all of its moving averages.
Technical indicators are still in the red, with the RSI hovering around oversold levels and the Momentum moving north below its midline.
The daily chart demonstrates that the XAU/USD pair still has capacity to drop to new 2022 lows despite the recent rebound. The lengthier moving averages continue to move decisively downward, far above the current price, but the 20 SMA has slightly lost some of its bearish vigor and is consolidating at about $1,665.
The RSI has mildly risen from its recent weekly low, which is now around 40, but the momentum indicator has continued to slide below its midline and maintained its downward slope. Just below $1,610, the immediate support level, large stops are suspected. The March 2020 high of $1,565.02 is within reach for Gold if it falls below the latter.
The $1,500 mark serves as the following support. The positive corrective advance beyond $1,671.90, the 50% retracement of the aforementioned rise, might occur if the price moves steadily past the aforementioned barrier.
