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Gold Forecast: Fails to Hang on to Gains – 19 October 2022

The gold markets initially rallied during the day on Tuesday but continue to see a lot of downward pressure as the United States dollar continues to strengthen, right along with interest rates in America. As long as that’s going to be the case, gold is going to continue to struggle to hang on the gain. The candlestick for the trading session is a microcosm of what we have been seeing lately, attempts to rally, but lackluster results.


At this point, it looks like the market is more likely than not going to break down through the bottom of the last couple of candlesticks, which is at roughly $1645. If we get through there, then it opens up an attempt to get back to the recent lows, and then eventually down to the $1600 level where I suspect there will be a certain amount of psychology attached to that level, perhaps offering another bounce.

What is clear is that even though we have bounced the last couple of days, there seems to be no real appetite to hang on the cold, and I think this continues to be a “fade the rally” type of situation. Gold is a very fickle asset to own, and it of course has a negative correlation to not only the US dollar, but interest rates coming out of that same country. If they both continue to rise, then it almost makes it impossible for gold to have any sustainable rally. I believe that the $1680 level continues to be a major resistance barrier as well, as it previously had been a major support level. “Market memory” should continue to be found right around that area.

I believe that sooner or later, the gold market will drive down to the $1500 level, which is a much more important level. Below there, we could even go down to the $1200 level. One thing is for sure, the Federal Reserve is going to continue to tighten monetary policy much longer than people had anticipated, and that’s part of what you are seeing on this chart. However, the first signs of the Federal Reserve loosening monetary policy will be like rocket fuel for this market, and gold will almost certainly be one of the best assets to own. We are nowhere near watching the Federal Reserve destroy inflation yet, so we may have a while before that happens.

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