VOT Research Desk
Nov1,2022
Market Analytics and Considerations
Despite the knee-jerk response to the US Personal Consumption Expenditure (PCE) Price Index, the price of gold records a sequence of lower highs and lows. Bullion appears to be headed toward testing the monthly low ($1617) as it reverses outside of the 50-Day SMA ($1680).
AFTER FAILING TO TEST THE 50-DAY SMA, THE PRICE OF GOLD FALLS More and more toward MONTHLY Down
In view of the recent increase in US Treasury yields, the price of gold is struggling to maintain its level. If it fails to hold the yearly low ($1615), it may follow the moving average’s negative slope.
The Federal Reserve is expected to implement another 75bp rate hike on November 2, and Chairman Jerome Powell and company may continue to prepare US households and businesses for higher interest rates as the Federal Open Market Committee (FOMC) appears on track to carry out its rate-hiking loop into 2023. This could have an impact on the near-term outlook for gold.
As a consequence, should the FOMC rate decision indicate a greater willingness to pursue a highly restrictive policy, the price of gold may be adversely affected. However, it is unclear whether the central bank will stick with its current strategy for combating inflation given that the CME FedWatch Tool predicts a relatively small rate increase in December.
With the Fed now acknowledging that “it would become suitable at some point to slow the pace of policy rate increases while assessing the effects of cumulative policy adjustments on economic activity,” a change in the Fed’s forward guidance may increase the appeal of gold. The precious metal may also continue to defend the September low ($1615) then would the FOMC announce a dovish price.
In light of the aforementioned, the price of gold may try to test the monthly low ($1617) as it reverses ahead of the 50-Day SMA ($1680), but the Fed rate decision may support the earlier metal if the central bank intends to undertake lesser rate hikes over the next months.
Following a succession of unsuccessful attempts to close above $1670 (50% expansion), the price of gold has been making lower highs and lows. The precious metal may continue to follow the 50-Day SMA’s negative slope ($1680) as it reverses ahead of the moving average.
The price of gold may drop towards the $1584 (78.6% retracement) zone if it fails to hold the September low ($1615) and closes below the Fibonacci overlap at $1601 (38.2% expansion) to $1618 (50% retracement), with the next area of interest being around the April 2020 low ($1568).
However, if gold prices remain above the monthly low ($1617) and advance over the $1648 (50% expansion), they may continue to trade inside the September range.
