Market Analytics and Considerations
Key Notes
The price of gold recovers after an intraday decline to around $1,811 but does not continue.
The USD provides support for the metal but is unable to hold onto its modest intraday advances.
The threat and hardline central banks work against the XAU/USD.
The price of gold faces difficulties in building on the 2% increase from the previous day and encounters a roadblock near the $1,822-$1,824 range, which is its maximum level seeing as late June reached earlier this month. The intraday decline, though, is very temporary and stalls close to $1,811. During the initial North American period, the XAU/USD switches to neutral and is still at the mercy of US Dollar price fluctuations.
A slight decline in the US dollar supports the price of gold.
In essence, a fresh step down in US Treasury bond yields prompts the US Dollar Index (DXY), which gauges the effectiveness of the Greenback vs a basket of currencies, to give up its marginal improvement. This is then viewed as a crucial factor supporting the price of gold expressed in US dollars. Moreover, the risk-on urge and the likelihood of future policy compression by prominent central banks, such as the Federal Reserve, limit the upside potential for the XAU/USD.
It is important to remember that the US central bank adopted a hardline stance and said it would keep raising interest rates to fight persistently rising inflation. Moreover, further rate increases have been hinted at by the European Central Bank (ECB), the Bank of England (BoE), the Reserve Bank of Australia (RBA), and the Reserve Bank of New Zealand (RBNZ). As a result, traders may be discouraged from making strong bull wagers betting on the quasi Gold price and capping returns.
Worries of a recession may boost the price of gold.
However, rising recession concerns, along with a rise in COVID-19 cases in China and international uncertainties, could be advantageous for the price of gold, a safe refuge. President Volodymyr Zelensky of Ukraine visits the US to engage with Vice President Joe Biden in the most recent episode in the Russia-Ukraine conflict. In the meantime, Russia claims that there is no hope of peace talks and that the prolongation of Western partners’
armament shipments to Ukraine will only serve to escalate the existing war.
The crucial macroeconomic data from the United States this week may serve as a new trigger for investors who prefer to postpone. On Thursday, the final US Q3 GDP figure is expected to be announced. The US Core PCE Price Index, that is the Federal Reserve’s preferred inflation barometer, will then come into focus. This could provide the price of gold a significant boost before the end-of-year holiday shopping season begins.
Technical prognosis for gold prices
Technically, optimistic speculators are preferred by admittance over the crucial 200-day Simple Moving Average (SMA). The fact that oscillators on the daily chart are staying securely inside the positive territory and are still long way from entering the overdone region supports the good setup. However, it will continue to be wise to hold off on placing for any additional increases till some follow-through purchasing occurs further than the multi-month peak, in the $1,822-$1,824 range.
The $1,812-$1,810 horizontal resistance threshold, on the other hand, appears to be defending the imminent negative at this time. Anything further decline may prompt prospective buyers to enter the market around the $1,800 level, which might assist restrict the fall around the 200-day SMA. The former is currently set somewhere around $1,786 and should serve as a solid foundation for the price of gold, which if violated strongly might completely reverse the near-term good perception.
