Attention to These Dates and Developments Next Week for Gold Prices!

• Gold prices rose on Friday, but then lost their strength.
• Neither sellers nor buyers have control of the critical $1,800 level.
• The initial forecast for US third-quarter GDP growth in a busy week stands out.

After the sharp decline seen on Friday, gold prices started the new week calmly. However, he had no difficulty in assessing the selling pressure around the dollar. After posting impressive gains on Wednesday, gold prices remained in the consolidation phase on Thursday and continued to rise ahead of the weekend. Gold surged above $1,800 on Friday, attracting buyers. However, the US ended the week in positive territory above $1,790, quickly erasing most of its daily gains in the late session.

What happened in the gold market last week?

Disappointing growth data from China depressed the market at the beginning of the week and pushed the dollar higher. But upbeat earnings numbers from major US banks on Monday helped Wall Street’s main indexes gain momentum and capped XAU/USD’s losses, allowing risk flows to dominate financial markets. In the absence of top macroeconomic data releases, risk perception remained the main driver of financial markets on Tuesday.

While gold prices climbed above $1,780 due to broad-based USD weakness, rising US Treasury bond yields forced the pair to cut its gains. The rally in US equities gained momentum mid-week, while gold prices gathered bullish momentum and climbed to fresh weekly highs above $1,790. Data from the US on Thursday showed weekly Initial Unemployment Claims dropped to 290,000, the lowest since March 2020, and the S&P 500 Index hit a new record high of 4,551.

Towards the end of the week, the benchmark 10-year US Treasury yield rose, but despite this, the dollar struggled to find demand as a safe haven. Increasing optimism about US lawmakers’ agreement on US President Joe Biden’s spending bill and news of Chinese real estate giant Evergrande’s $83.5 million bond interest payment boosted the market mood as the week closed.

These developments affected gold prices in the past week.

Ahead of the Federal Reserve’s blackout period, which will begin on October 23, some policymakers have voiced their support for the contraction to begin in November. However, market participants showed little or no interest in these comments. Cleveland Fed Chairman Loretta Mester and Fed Chairman Randal Quarles said the contraction test was met, while Fed Chairman Christopher Waller argued that they may need to act faster if inflation remains too high.

Helped by the sharp correction in US T-bond yields and renewed dollar weakness on Friday, XAU/USD climbed above $1,800 and hit $1,813, its highest level since early September. However, the profits made before the weekend and the hawkish comments of FOMC Chairman Jerome Powell caused the pair’s rally to come to an end at the end of the American session. Powell noted that they expect high inflation to continue until next year, adding that it is time to contract.

What developments are important for gold prices next week?

September New Home Sales and Conference Board’s October Consumer Confidence Index data will appear in the US economics newsletter on Tuesday. Market reaction is likely to remain muted as investors stay on the sidelines ahead of major events. On Thursday, the European Central Bank (ECB) will announce its Interest Rate Decision and publish the Monetary Policy Decision Statement. Over the past week, ECB officials reiterated that the increase in inflation in the euro area is expected to be temporary and noted that they will continue the expansionary policy even after the Pandemic Emergency Purchase Program (PEPP) ends in March.

In addition, Bundesbank Chairman Jens Weidmann, who has been loudly criticizing the ECB’s dove policy, announced his resignation at the end of the year. If the ECB event highlights the policy difference with the Fed, the dollar could rebound and expose XAU/USD weakness, according to analyst Eren Şengezer. More importantly, the US Bureau of Economic Analysis will release its first forecast for third-quarter Gross Domestic Product (GDP) growth. On an annual basis, GDP is expected to grow by 3.2%, following the 6.7% growth recorded in the second quarter. A GDP reading close to market consensus could trigger a fresh rise in US T-bond yields, given the disappointing September Non-Farm Payrolls data failed to change expectations for contraction.

The benchmark 10-year US T-bond yield remains within touching distance of the critical 1.75% level, and a break above this level could open the door for additional strength in the dollar. On the other hand, a large loss could cause investors to price the Fed’s delay in reducing asset purchases and put heavy pressure on the dollar. Finally, the Personal Consumption Spending (PCE) Price Index, the Fed’s preferred inflation indicator, will be the last data of the week to be watched on Friday. However, if the trend has already been determined by previous events, this data alone is unlikely to have a significant impact on XAU/USD.

What levels will gold prices see next week?

Although the Relative Strength Index has risen to 60 on the daily chart, it is difficult to say that gold prices will continue to rise, according to analyst Eren Şengezer. The SMA and the 200-day SMA meet. Above this hurdle, the $1,825/30 area (38.2% Fibonacci retracement of the April-June uptrend, static level) could be seen as the next target before $1,840 (static level).

On the downside, $1,780 (50-day SMA) for gold prices is aligned as initial support ahead of $1,770 (former resistance, Fibonacci 61.8% retracement). Sellers will remain in control of the market as long as the above-mentioned resistance persists.

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