According to the performance on the daily chart below, the price of XAU/USD (gold) is still in a bearish trend range and the bears may control the performance in case the prices move towards the 1638 and 1620 support levels.
Bullion prices have had a tepid week so far, posting modest gains as the strength of the US currency – a major headwind of recent months – fades slightly. However, the US currency continues to present headwinds as the Federal Reserve embarks on a tight monetary policy to fight inflation.
“I tend to think that Fed tightening is now very much ‘in the price,”said Philip Klapwijk, Managing Director of Precious Metals Insights Ltd, “However, the scope for a significant near-term recovery in gold prices is very limited while interest rates are rising and the US dollar remains strong,” he added.
For his part, the President of the Federal Reserve in Atlanta, Rafael Bostic, reiterated that the US central bank is focused on calming inflation, which is running at its highest levels in four decades. As such, Treasury yields were trading near multi-year highs ahead of the US housing numbers for September and the Federal Reserve’s Beige Book due later on Wednesday.
XAU/USD (gold) price is trying to take advantage of a weaker US dollar and lower Treasury yields amid growing concerns that the global economy may plunge into recession. Bullion prices have had a wild ride this year, having fallen nearly 20% since March as the US Federal Reserve tightened monetary policy aggressively, prompting investors to seek refuge in the US dollar. The non-rising metal, which usually has a negative correlation with the dollar and rates, has come under pressure from the strong dollar.
British Chancellor of the Exchequer Jeremy Hunt’s move to rip up the remainder of the Prime Minister’s controversial economic program to restore the UK’s public financial system boosted sterling and state bonds on Monday, causing dollar and US Treasury yields to plummet. This was helped by gold, which rose 1.5% in the session. Bullion prices are still trading near their lowest level in the month, with fears of a hawkish Fed policy to crush hot inflation weighing on the metal. And in China, President Xi Jinping offered few signs of a slowdown in the nation’s Covid Zero strategy and more support for the struggling real estate sector.
“Recent economic data has not provided a reason for much optimism, but that may change over the coming months, as central banks are now certainly not far from their final rates,” said Craig Erlam, chief market analyst at Oanda Europe Ltd, adding that resistance in the future could be found at around $1,680. and $1,700 an ounce.
According to the performance on the daily chart below, the price of XAU/USD (gold) is still in a bearish trend range and the bears may control the performance in case the prices move towards the 1638 and 1620 support levels. From the last and lower levels, it is better to think of buying gold again. As I mentioned before, there will be no real break of the current downtrend without stability above the psychological resistance of 1700 dollars an ounce.