Gold Violates Upward Channel at $1,791 – Who’s up for a Sell Trade?
Gold Violates, Gold closed at $1,788.90, after setting a high of $1,802.90, and a low of $1,772.40. Gold fell on Friday, on the back of the strong US dollar and an uptick in the US Treasury yield, which remained flat throughout the day on the benchmark 10-year note, closing at 1.56% after a rise to 1.61%.
On the other hand, the US Dollar Index, which measures the value of the greenback against six major rival currencies, came back stronger and pushed its prices to the 94.30 level, which ultimately added to the strength of the US dollar and had a negative impact on the yellow metal prices.
The precious metal came under pressure after investors tapped in for further guidance on tapering of economic support, which they expect to glean from the upcoming Federal Reserve meeting, which is scheduled for this week. The prospects of interest-rate hikes in the near or more distant future kept the gold prices under pressure for the day.
Reduced level of economic support to be announced at FOMC meeting
The expectations that a reduction in the level of economic support will be announced at the next FOMC meeting are also keeping the gold prices lower for the day. While gold is considered a hedge against inflation, the prospects of interest rate hikes and reduced economic support are pushing government bond yields and the dollar higher, keeping the market appeal of the yellow metal down.
Review of Economic Events
On the data front, at 17:30 GMT, the Core PCE Price Index for September came in. It remained flat, in line with the expected 0.2%. The Employment Cost Index for the quarter surged to 1.3%, against the projected 0.9%, which supported the US dollar, adding further to the losses in gold. The Persona Income declined to -1.0%, against the predicted -0.2%, weighing on the US dollar, which caused further losses in gold. Personal spending remained flat, in line with the expectations of 0.6%.
At 18:45 GMT, the Chicago PMI for October was released, showing a rise to 68.4, against the forecast of 63.6, supporting the US dollar and putting; further pressure on the yellow metal. At 19:00 GMT, the Revised UoM Consumer Sentiment came in. It was in line with the expectations of 71.7. The Revised UoM Inflation; Expectations also remained unchanged at 4.8%.
Meanwhile, the tensions between the US and China over the trade deal; Taiwan and the origin of the coronavirus; kept uncertainty alive in the market, which ultimately capped any further losses in the gold prices. Recently, the Chinese foreign ministry spokesman Wang Wenbin, said that a declassified US intelligence report, stating that it was plausible that the COVID-19 pandemic originated in a laboratory, was unscientific and had no credibility.
Gold Violates Upward Channel at $1,791 – What’s Next?
In the 4-hour timeframe on Monday, the precious metal, gold, was rejected at $1,789, and it has started closing candles below this level. That suggests a bearish bias among investors. Gold is now likely to gain support at the 1,772 level, which is being extended by an upward channel. The closing of candles below the 1,790 level supports a selling bias.
On the other hand, immediate support for gold remains at 1,772, and violation of this level; would expose it to the 1,758 level. On the higher side, the resistance remains at levels of 1,789 and 1,802. The RSI and Stochastic support a selling trend today. We need to keep an eye on the $1,789 level – a break below this might; offer us a selling trade and vice versa. Good luck!