GOLD: The US dollar and growing yields make gold budge. Will Initial Unemployment Claims Lead to an Upswing?

Oct 20, 2022
VOT Research Desk

Market Insights, Considerations & Analytics

In APAC trading, gold prices are still under strain due to the strong USD and increasing yields.

Initial unemployment claims data will be released; a higher number could lead to a bounce. XAU/USD is approaching important levels that could influence the direction of the price in the short term.

Gold prices fell around 1.3 percent on Wednesday as a result of higher Treasury yields and a stronger US dollar. Prices fell to a new October low near 1,628 as a result of that move, which erased gains from the previous two days. Bullion bears now have an appealing opportunity to target the 1,600 level, as the September 2022 low of 1,614.92 is within striking distance.

After a higher-than-anticipated inflation report made its way across the Atlantic and triggered a wave of bond selling, the policy-sensitive 2-year Treasury yield reached a closing level above 4.5 percent. The consumer price index (CPI) for the United Kingdom in September increased by 10.1% over the previous month. That was a little bit more than the consensus forecast of 10%.Rate traders see the soaring rate of inflation the UK as a hawkish sign for the Federal Reserve.

Gold, a non-interest-bearing asset, will suffer greatly from rising interest rates. Due to the impact on the US dollar and the size of the Treasury market, as well as higher US rates, this is even more true. However, until economic data suggest that inflation may soon abate, gold prices may struggle in the short term. That could come from a print of soft, high-impact economic data from the United States, but the calendar only has numbers about the labor market that happen frequently.

A decrease in FOMC bets would likely result from an increase in US initial jobless claims, paving the way for higher bullion prices. At 12:30 UTC, those data for the week ending October 15 are expected. A Bloomberg survey indicates that analysts anticipate receiving 230 thousand initial claims. That would be an increase from the Gold Technical Outlook Gold is on track to test the low from September (1,614.92), with prices hovering within 1% of the level while trading lower in Asia-Pacific.

The bearish momentum of the move is highlighted by the fact that both the MACD and RSI oscillators are trending lower. If the September level breaks, XAU would face a significant challenge at the psychological level of 1,600.

Analytics

On the other hand, those levels might serve as a starting point for prices to get back up. If this is the case, falling 20-day and 50-day Simple Moving Averages as well as the 23.6% and 38.2% Fibonacci retracements are potential sources of resistance.

T – Indicators

Moving Averages