Gold prices fell on Tuesday as the dollar gained momentum. The dollar’s rise precedes Wednesday’s Fed rate decision, despite lower U.S. Treasury yields. Expectations are that the Fed will keep interest rates unchanged, but announce that it will narrow its bond-buying program. In the light of these developments, gold analyzes of two market analysts cryptocoin.com compiled for our readers.
“Gold prices continue to consolidate, declining”
The Federal Reserve began its 2-day meeting on Tuesday and will announce its monetary policy on Wednesday. CNBC conducted a poll to see when economists believe the Fed will trigger a rate hike before the decision. Survey respondents overwhelmingly predict that the Fed will announce its decision to cut monthly asset purchases on Wednesday and begin tapering in November. The Fed is expected to reduce its $120 billion monthly Treasury and mortgage-backed securities purchases by $15 billion a month, which will end asset purchases by May.
Market analyst David Becker states that gold prices continue to experience a consolidative tone with a decline, and prices are now able to recapture resistance at the 10-day moving average currently supported at 1,790. The analyst draws attention to the following technical levels:
Additional support is seen near October’s low of 1,750 and resistance near October’s high of 1,812. Short-term momentum turned negative as it produced a quick stochastic cross-sell signal. Medium-term momentum is consolidating as the MACD histogram is printed in positive territory with a sliding trajectory indicating consolidation.
Technical analysis
According to market analyst, Christopher Lewis, gold markets generally remain very volatile as the 200-day EMA is stuck and the 200-day EMA is extraordinarily flat. Therefore, the analyst says that since we have not only the 200-day EMA here, but also the 50-day EMA here, we will continue to see a lot of breakouts going forward around this area. Christopher Lewis continues his analysis:
The downtrend line also enters the picture alongside the $1,800 level. The $1,800 level is of course a big, round, psychologically important figure. But it’s also showing quite a bit of resistance from recent explosion attempts. If we climb above the $1,810 level, we could look to the $1,835 level, which is even more resistant. There, gold becomes more “buy and hold” for longer term action.
On the downside, if he can break the bottom of last week’s Friday candlestick, this is a market that could really start to crumble, perhaps extending losses to the $1,750 level, to the next $1,725 level. The analyst states that since the negative correlation between 10-year bond yields and gold has been very strong lately, it will most likely move in the right direction as US interest rates rise.
All else being equal, this is a market that will be very difficult to hold on until there is some kind of big pusher candlestick. So position sizing will of course be very important. So be mindful of your initial position and only add when you have clarity.
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