Credit Suisse Scared With Gold Assumption! Here are the Next 3 Levels

Gold bounces off three-week lows touched this Thursday. Europe maintains its modest gains in the first half of the session. But a meaningful upside move still looks difficult. Credit Suisse says gold will come under pressure again.

“We expect the gold price to come under pressure again”

Gold strengthened its “double top”. Strategists at Credit Suisse expect the yellow metal to weaken further. In this context, strategists make the following assessment:

Gold below $1,691/76 strengthened its current major ‘double top’. Therefore, we expect gold to come under pressure again with a top in place. The next reinforcement stands at $1,614, followed by $1,560. However, we note that it is finally seen as $1,451/40.

Only a convincing weekly close above $1,712 is likely to ease the pressure, according to strategists. From this point of view, strategists make the following statement:

Only a convincing weekly close above $1,712, the 55-day average, is likely to ease the pressure on the precious metal. The next resistance is at $1,817, the even more valuable 200-day average. Moreover, we expect this number to be the highest level.

What will be the effects of macro developments on yellow metal?

The US dollar is pulling down and reducing some of the previous day’s strong gains. Apart from that, there are growing concerns of a deeper global economic downturn. Also, the prevailing cautious market mood sees an afterwind mission for the believer-benefit metal.

However, according to market analyst Haresh Menghani, expectations of a more aggressive policy tightening by major central banks are ending any meaningful upside move of the yieldless gold. Markets are pricing in jumbo rate hikes by the European Central Bank and the Bank of England. He also expects the Federal Reserve to stick to the aggressive rate hike cycle. As you follow, CME’s FedWatch tool is betting almost 100% on the fourth consecutive 75bps rate increase at the next FOMC policy meeting in November. The bets have been reaffirmed by recent hawkish statements from several Fed officials reiterating that they are committed to the US central bank’s aggressive effort to counter rising prices.

This pushed the yield on the interest-sensitive 2-year US government bond to a new 15-year high. Also, the benchmark 10-year Treasuries hit the highest level since the 2008 financial crisis. The analyst notes that rising US bond yields will likely limit any meaningful USD decline. This, he says, shows that the path of least resistance for gold is down.

Market participants are now looking at the US economic report, which includes the Philly Fed Manufacturing Index, First Weekly Unemployment Claims and Current Home Sales. This, along with speeches from influential FOMC members and US bond yields, will drive demand for USD. Apart from that, according to the analyst, it is likely to gain some momentum under the broader risk sensitivity.

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