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Gold Technical Analysis: Prices Witness Bullish Breaches – 09 November 2022

The continuation of the US dollar price allowed the XAU/USD gold price to move strongly upwards, breaching the psychological resistance level of 1700 dollars an ounce. Gains extended to the resistance level of 1717 dollars an ounce, the highest in prices in a month, and it settles around the 1711 dollars an ounce at the time of writing the analysis. Besides the dollar’s decline, gold gained momentum from lower bond yields as investors looked ahead to US inflation data, due to be released later in the week.


In general, investors are waiting for the results of the US midterm elections. Republicans are expected to control the House and possibly the Senate. Investors are also eyeing consumer price inflation in the US, where the data could have a significant impact on interest rate expectations. Economists expect a slight slowdown in the annual rate of consumer price growth, which could add to optimism about a slower pace of rate hikes.

With Americans heading to the polls across the country amid rising inflation and fears of a possible recession, analysts say investors appear to be betting on Republicans to control at least one House of Congress. And that, along with the Democratic White House, could result in little to no achievement in Washington, which may be bad for society but may also preserve the status quo in economic policy. Markets tend to hate uncertainty.

If Republicans end up winning at least control of the House of Representatives, the reaction in financial markets could be modest, according to economists at Goldman Sachs. Stocks are already up in anticipation, with two consecutive days of gains of at least 1% ahead of Election Day. But the Democrats’ surprise win could upset the market if it prompts investors to expect higher corporate taxes and other policy changes.

A Republican victory could also bring its own risks, which manifest themselves over time. First, it could mean that any aid to the economy from Congress in the event of a potential recession would be less likely to pass and weaker than it would be under a Democratic-controlled Congress. Economists are fiddling with what would happen in a recession because something more influential than politics controls the economy, as well as markets: high inflation and rapid interest rate hikes that the Federal Reserve pays to control them.

The most important milestone for the markets this week of Election Day may be the upcoming inflation report on Thursday. This data, which economists expect to show for the fourth consecutive month of slowing gains from the summer peak, is likely to have a much larger impact on what the Fed does in terms of interest rates.

I also expected before that the stability of the XAU/USD gold price above the $1685 resistance will support the bulls to test the $1700 psychological resistance in a row. This may increase technical buying deals, taking advantage of the absence of the US dollar from the markets. Until the US inflation figures are announced, which will have a strong reaction to the future market expectations for the policy of the US Federal Reserve.

The recent gains have moved the technical indicators towards overbought levels.If gold does not gain more momentum, it may be exposed to profit-taking at any time.The closest targets for the bulls are currently the resistance levels of 1728 and 1740 dollars, and they can be sold with no risk.On the other hand, according to the performance on the daily chart below, the price movement towards the support level of 1678 dollars will be important for the bears to control the trend again.

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