Market analyst Dhwani Mehta says gold is expanding its engagement with the 21DMA as the US dollar recovers. The analyst notes that the US’s 3rd quarter GDP may give new clues about the talks of a potential Fed pivot. Also, the analyst says that gold is facing south in the midst of bearish techniques. In this environment, Şahin sees it as possible for the ECB increase to be a catalyst. We have prepared Dhwani Mehta’s market comments and gold price technical analysis for our readers.
“Gold price is looking for a clear trending trend!”
Koindeks.com As you follow, gold price is looking for a clear bias, stopping its two-day rally to $1,700 as investors prepare for critical events this Thursday. The US dollar is generally rebounding a bit after the relentless selling so far this week. There are growing expectations that the Fed will downshift in rate hikes. This exacerbated the pain in US Treasury yields along the curve. Also, it turned into a long periodic sale on the dollar.
In the middle, 10-year US interest rates attacked the critical 4% level. It eroded about 25 basis points in two days. The Bank of Canada’s (BOC) pigeon rate hike decision shows that the slowdown in the global tightening race has begun. Therefore, it also negatively affected the US dollar, suggesting that the Fed may soon be on the same track. The BOC raised interest rates by 50 bps versus the expected 75 bps. This took the markets by surprise.
The recent series of negative U.S. Manufacturing and Services surveys, combined with poor housing information, is fueling the health concerns of the world’s largest economy. Thus, although it is ready for 75 bps in November, a possible dove slip from the Fed increases its risks.
“Gold is likely to return to monthly lows without error”
However, all eyes are now on US Q3 GDP data, with an expected recovery of 2.4% on a quarterly basis compared to -0.6% previously reported. It is possible that stronger-than-expected information will undermine Fed expectations. It is also possible that this will save the dollar bulls from the recent decline. Therefore, the gold price may stop the recovery mode. Also, gold is likely to turn south towards lunar lows.
But the ECB’s decision to raise rates will also be crucial for determining the next price side of the dollar and the yellow metal. It’s possible that a hawkish 75bps rate hike from the ECB could trigger recession horrors. That would be a good sign for the faithful harbor dollar. The yellow metal looks to be in a real lose-lose situation for the big day ahead.
Gold price technical view
Gold price faced stiff resistance at the 21-Day Moving Average (DMA), currently $1,669. The 14-day Relative Strength Index (RSI) remains below the midline, maintaining the downside bias. Failure to find acceptance above 21DMA will require testing the previous day’s low of $1,650. The next cushion holds Tuesday’s low at $1,638.
Selling pressure will likely intensify under the latter. As such, it will open the bottoms for a fresh drop to the $1,617 monthly low. Alternatively, bulls need to find solid support above 21DMA to extend the renewed uptrend. Further above, Monday’s high of $1,671 will kick in. The next upside target is the Oct. 13 high of $1,683 with the $1700 mark actually settled.