Gold prices benefited from general weakness in the US dollar and lower US yields. Market analyst Eren Şengezer says that gold may face resistance at $1,780 before targeting $1,800. According to the analyst, it is possible that risk flows will continue to put pressure on the US Dollar and help gold rise.
Gold started the week cautiously
China trade data showed that the country’s trade surplus expanded in October at a smoother pace than expected. This disappointing information caused the markets to start the week cautiously. In addition, Chinese authorities dismissed reports suggesting that China plans to ease restrictions on Covid. These developments did not allow gold to increase its interests on Friday. But the positive change in risk sensitivity helped him limit his losses.
Wall Street’s major indexes gained traction late Monday as investors began pricing in a Republican victory in the US Midterm Election and the dollar struggled to find demand. It is possible that the election result will be finalized at the beginning of December. However, Republicans continue to move towards gaining a majority in the House. Gold prices rose above $1,700 on Tuesday, with risk flows dominating financial markets. He also managed to gain stability there. Markets were quiet on Wednesday as investors avoided making big bets ahead of US CPI information.
Gold prices surged after US CPI
On Thursday, the US Office of Labor Statistics reported that annual CPI in the US fell to 7.7% in October from 8.2% in September. In addition, Core CPI, which excludes variable power and food prices, fell from 6.6% to 6.3%. Both of these data came in below market expectations. Thus, it caused the dollar to come under heavy selling pressure. The US Dollar Index (DXY) has lost more than 2% on the day. As a result of this, gold rose above $1,750 for the first time in nearly three months.
In the midst of this, market participants cut their bets on another 75 bps rate hike in December. This triggered a sharp decline in US Treasury bond yields. According to the CME Group FedWatch Tool, the possibility of a 50 bps Fed rate hike in December currently stands at 80%, compared to 50% before the inflation report.
On Friday, optimism about China’s move away from zero Covid policy gave risk assets an extra foothold. This put even more strain on the safe-haven US Dollar. In contrast, the horse’s prices continued to rise and climbed above $1,760 on Friday.
What’s on the information agenda for next week?
October Industrial Production and Retail Sales numbers from China will be released on Tuesday. However, according to the analyst, it is possible for investors to ignore this data and focus on developments surrounding the Covid restrictions. Analyst expects gold to rise with the favorable demand outlook if China continues to relax its rules.
On Wednesday, the US Census Office will release information for October Retail Sales, which is expected to show an expansion of 0.8%. Since sales are not adjusted for price changes, they are unlikely to trigger a noticeable market reaction.
The Philadelphia Federal Reserve Bank Manufacturing Survey and the US Department of Labor’s weekly First Unemployment Claims data will be the final data for the week from the US on Thursday.
“Gold Possible to Take Advantage of US Dollar Weakness”
According to the analyst, data releases do not have the potential to move the markets significantly. As such, associates will closely monitor Fedspeak and its overall risk perception. The analyst says that if global stock indices maintain their bullish momentum next week, it is possible for gold to take advantage of the broad US dollar weakness.
Koindeks.com As you followed by the soft October inflation report, Dallas Federal Reserve Leader Lorie Logan and San Francisco Fed Leader Mary Daly noted that it is appropriate to slow the pace of rate hikes. In the example form, Kansas City Federal Reserve Leader Esther George said she would support a “more measured” approach to rate hikes. Market positioning suggests more room on the downside for the dollar, with the probability of a 75bps rate hike still remaining around 20% in December.
Gold prices technical view and gold forecast survey
Market analyst Eren Şengezer makes the following analysis regarding the technical outlook of gold. The Relative Strength Index (RSI) indicator on the daily chart is about to rise above 70 into the very buy zone for the first time in March. This technical improvement shows that gold may make a technical correction. However, the short-term outlook remains bullish as gold closes well above the 100-day Easy Moving Average (SMA) and Fibonacci’s long-term downtrend pulls back 23.6%.
$1,760 stands as discontinuous resistance. Also, if this level is confirmed as a foothold, it is possible for gold to target $1,780 and $1,800. On the downside, $1,720 stands as valuable reinforcement. Only a daily close below this level can be seen as a valuable bearish development. Also, it is possible that it could open the door for more losses on the $1,700 and $1,675 side.
The FXStreet Forecast survey points to a neutral/bullish trend in the short term, with the one-week average target remaining at $1,768. The one-month outlook paints a mixed picture. But the quarterly outlook remains overwhelmingly bullish with a goal of $1,801.