Nov 02 2022
VOT Research Desk
As the US dollar remains weak ahead of the Federal Open Market Committee (FOMC) meeting on Wednesday, the gold price (XAU/USD) shows modest rises in the mid-$1,600s.
In addition to pre-Fed worry, weaker rates and cautious confidence in the market have recently favored gold purchasers.
Nonetheless, the US Dollar Index (DXY) accepts bids to retest its intraday low near 111.35, extending the previous day’s drop from a one-week high amid uncertainty about the Fed’s next move.
The recent dip in US Treasury yields and the encouraging reports from China, a big consumer of gold, may also be placing downward pressure on the greenback’s index versus the six main currencies, as well as driving XAU/USD prices. US 10-year Treasury rates fell two basis points (bps) to 4.03% at the latest, as traders remain divided on the US central bank’s next move following the 75-bps rate hike and forecasts for easy rate hikes beginning in December.
It should be mentioned that Yi Gang, the Governor of the People’s Bank of China (PBOC), just crossed the wires and indicated that China’s economy is still on track.
We hope for a smooth landing in the housing market, the policymaker continued. Furthermore, an official from the China Banking and Insurance Regulatory Commission (CBIRC) helped lift spirits by stating that the property sector is currently stable.
The previous day’s stronger US data and hawkish Fed bets, as measured by the CME’s Fed Watch Tool, pose a challenge to XAU/USD purchasers.
Nonetheless, the S&P 500 Futures post minor gains despite Wall Street closing in the red.
Moving forward, the market’s cautious optimism may assist the gold price to continue firmer, but modest movements are probable ahead of the FOMC. In this regard, the Fed’s dovish rise could exacerbate the XAU/USD rally.
Gold Technical Analysis
Gold price extends previous day’s recovery from a five-week-old rising trend line, hovering around $1,634 at press time, despite sluggish MACD and RSI (14).
As a result, XAU/USD bulls appear skeptical and require confirmation to extend the recent rise.
However, a one-month-old falling resistance line and the 21-day moving average, both at $1,658 and $1,660, hold the keys to the metal’s future rise. Following that, the 50-DMA might serve as gold bears’ last line of defense around $1,680 before directing them to the previous monthly high near $1,730.
Pullback moves, on the other hand, must overcome the aforementioned support line near $1,634 in order to aim for the new yearly low, which is currently near $1,614.
