Gold: As US inflation data approaches, the gold price struggles to maintain support.

Oct 13, 2022
VOT Research Desk

Market Insights and Analysis

• A noteworthy degree of support is being traded on by gold.

The most recent FOMC minutes underline the US central bank’s resolve to fight inflation, despite the potential short-term side effects. According to the FOMC minutes, “several members highlighted that the cost of taking too little action to bring down inflation likely surpasses the risk of taking too much action.

Financial markets have already priced in 75 basis point hikes at the next two Fed meetings. However, the Fed may halt monetary tightening if inflation significantly declines. While another Fed dove, Chicago Fed President Charles Evans, noted that while rates need to remain at elevated levels, “overshooting is costly…this puts a premium on the strategy of getting to a place where policy can plan to rest and evaluate data and developments,” Fed vice chair Lael Brainard warned that the recent series of rate hikes may be slowing the US economy in unobserved ways.

To change the Fed’s mind, today’s US inflation data at 13:00 BST will need to be closely monitored, but it will also need to significantly deviate from expectations.

In advance of the inflation report, US Treasury yields, a major driver of the gold price in recent months, are still at elevated levels today

.Even though the double-top pattern that is currently being formed suggests that short-term yields in the United States may be at their peak, the 2-year note in the United States is still around levels that were last seen 15 years ago.

ANALYSIS

In anticipation of the US inflation report, gold is currently sitting in a holding pattern. A re-test of the $1,615 low suggests that the longer-term downtrend—lower highs and lower lows—remains dominant. If support is around $1,660 per ounce falls to $1,640/oz late plays a role. Around $1,682/oz, short-term resistance is seen.

According to data from retail traders, 79.45 percent of traders are net-long, with a ratio of 3.87 to 1.The number of net-long traders is up 3.01 percent from yesterday and is up 7.68 percent from last week, while the number of net-short traders is up 1.83 percent from yesterday and is down 7.13 percent from last week.

The fact that traders are net-

long Gold suggests that prices may continue to fall, which is contrary to our usual contrarian approach to crowd sentiment. We have a stronger Gold-bearish contrarian trading bias as a result of current sentiment and recent changes, and traders are further net-long than they were yesterday and last week.

Gold  Daily Pivots – Oct 13

Simple Moving Averages