Sep 26, 2022, 7:00 p.m. +15:00 a.m
VOT Research Desk
Gold Argument and Considerations
Gold prices fell below double top support last week, marking a new two-year low.
The break of the double top formation’s neckline last week marked the beginning of a trend toward bearish breakouts in the formation, which has been established over the past two years.
Breakout strategies may continue to be challenging because gold has been particularly challenging since breaking to fresh lows.
On the other hand, there is a plethora of potential resistance points above that could be useful for trend strategies.
The article’s analysis is based on price action and chart formations. Learn More Since, the FOMC’s rate decision on Wednesday, global markets have appeared to be unmoved. The collapse of the British pound is probably the most notable development thus far; however, it is difficult to ignore the change in US rates, and it appears that there is a disconnect between stocks, bonds, and FX at this point.
Given that stocks are grasping at crucial support levels, that speaks volumes. However, US equities have not yet experienced the extreme moves seen in FX. In our opinion, we haven’t even actually seen that in gold yet.
Gold did fall to a new two-year low last week as interest rates rose. Last Monday, when gold was rolling at that crucial support, I had warned of this event. In addition, as I stated in that article, gold prices were indicating the possibility of a larger break.
The break last week triggered a double top formation, which assumes that prices have already reached their peak and is frequently used to target bearish breakdowns.
This would also seem to fit the fundamental environment, and considering how long it took to set up and complete the formation, the bearish move it projected could be quite large, suggesting a longer-term move down towards the $1250 area.
Even though that event probably played a role, another major factor that has grown in importance since March is the Fed’s hawkish plans, which have only intensified over the course of the year.
The most recent installment from the Fed came last week, when Chair Powell once more pledged to make the fight against inflation a top priority. The fact that Powell has remained somewhat consistent since his speech in Jackson Hole suggests that this message is becoming increasingly familiar to the markets.
Gold prices have also been hit hard ever since that speech.
