Gold: As markets gaze to the Fed, price of gold maintain their fragile recent uptrend.

VOT Research Desk

Nov 2,2022

Market Analytics and Considerations

As the precious metals market, of course, joins all others in anticipating the United States Federal Reserve’s monetary policy position later, gold prices are sustaining over psychological support at $1650/ounce on Wednesday.

Despite being better managed than elsewhere in the developed world, inflation in the US is still uncomfortably high, and the Fed is predicted to increase borrowing prices by three quarters of one percent. Jerome Powell, the Fed’s chair, is expected to announce that any additional aggressive hikes from this point on will be data driven. The Dollar has therefore lost some luster as market investors prepare for this modestly “dovish” change from the most significant central bank in the world.

The Fed underdelivering in this area poses a risk to gold bulls. A message that the markets interpret as being more alarmist than anticipated might very well re-increase the underlying pressure on gold. As a result of the continually rising interest rates that weigh against non-yielding gold and compel a reassessment of the assertion that it serves as any type of inflation hedge, prices have been progressively declining from the heady peaks above $2000 observed in March.

In fact, the 1.6% decline in gold prices in October marks the worst downward trend in price of gold since 1869, according to experts at Deutsche Bank. It will be interesting to watch whether gold can advance from current levels, which have largely supported the market since late September, if the Fed’s thinking turns out to be as the market anticipates.

This year, gold has been under pressure a lot, but the fightback since September has been persistent if not spectacular. The chart demonstrates that the dominant downtrend line, which has capped the market since March, intersects with the current uptrend channel. A significant challenge to that yield could be seen in the near future if prices can maintain this channel. The price action on October 5 and 6 clearly demonstrates that the previous attempt at such a challenge was swiftly rejected, but a new attempt may just be starting from a stronger foundation and may prove to be more durable as a result.

Watch out for a test of that upside channel top for the time being. It comes in at $1681.43, which is very close to that moving average of 50 days. In contrast, a decline below the channel base would almost certainly prompt a rapid retest of this month’s lows.

Technical Parameters – Daily

Gold Futures