Gold prices benefited from general weakness in the US dollar and lower US yields. Market analyst Eren Şengezer says that gold could face resistance at $1,780 before targeting $1,800. According to the analyst, risk flows are likely to continue to put pressure on the US Dollar and help gold rise.
Gold started the week cautiously
Chinese trade data showed that the country’s trade surplus expanded at a softer-than-expected pace in October. These disappointing data caused the markets to start the week cautiously. Additionally, Chinese authorities have dismissed reports claiming that China plans to ease restrictions on Covid. These developments did not allow gold to extend its gains on Friday. However, the positive change in risk sensitivity helped him to limit his losses.
Wall Street’s major indexes gained traction late Monday as investors began pricing in a Republican victory in the US Midterm Elections and the dollar struggled to find demand. The election result is likely to be finalized in early December. However, Republicans continue to move towards gaining a majority in the House. Gold prices rose above $1,700 on Tuesday, with risk flows dominating financial markets. He also managed to gain stability there. Markets were quiet on Wednesday as investors avoided making big bets ahead of US CPI data.
Gold prices surge after US CPI
On Thursday, the US Bureau of Labor Statistics reported that annual CPI in the US fell to 7.7% in October from 8.2% in September. In addition, Core CPI, which excludes variable energy and food prices, decreased from 6.6% to 6.3%. Both of these data came in below market expectations. Thus, it caused the dollar to come under heavy selling pressure. The US Dollar Index (DXY) has lost more than 2% on the day. As a result, gold rose above $1,750 for the first time in nearly three months.
Meanwhile, market participants cut their bets on another 75 bps rate hike in December. This triggered a sharp decline in US Treasury bond yields. According to the CME Group FedWatch Tool, the probability of a 50 bps Fed rate hike in December currently stands at 80%, compared to 50% before the inflation report.
On Friday, optimism about China’s move away from its zero Covid policy gave risk assets an extra boost. This put even more weight on the safe-haven US Dollar. In contrast, the horse’s prices continued to rise and climbed above $1,760 on Friday.
What’s on the data agenda for next week?
October Industrial Production and Retail Sales figures from China will be released on Tuesday. According to the analyst, however, investors are likely to ignore this data and focus on developments surrounding the Covid restrictions. The analyst expects gold to rise with the outlook for improved demand if China continues to relax its rules.
On Wednesday, the US Census Bureau will release October Retail Sales data, which is expected to show an expansion of 0.8%. Since sales are not adjusted for price changes, they are unlikely to trigger a noticeable market reaction.
The Philadelphia Federal Reserve Bank Manufacturing Survey and the US Department of Labor’s weekly Initial Unemployment Claims data will be the final data for the week from the US on Thursday.
“Gold Possible to Take Advantage of US Dollar Weakness”
According to the analyst, data releases do not have the potential to move the markets significantly. Therefore, participants will closely follow Fedspeak and the overall risk perception. The analyst says that if global stock indices maintain their bullish momentum next week, it is possible for gold to take advantage of the broad US dollar weakness.
cryptocoin.comAs you followed by the soft October inflation report, Dallas Federal Reserve Chairman Lorie Logan and San Francisco Fed President Mary Daly said it was appropriate to slow the pace of rate hikes. Similarly, Kansas City Federal Reserve Chairman Esther George said she would support a “more measured” approach to rate hikes. Market positioning suggests more downside for the dollar, with the probability of a 75bps rate hike still remaining around 20% in December.
Gold prices technical view and gold forecast survey
Market analyst Eren Şengezer makes the following analysis regarding the technical outlook of gold. The Relative Strength Index (RSI) indicator on the daily chart is about to move into the overbought zone above 70 for the first time in March. This technical improvement shows that gold may make a technical correction. However, the short-term outlook remains bullish as gold closes well above the 100-day Simple Moving Average (SMA) and Fibonacci’s long-term downtrend pulls back 23.6%.
$1,760 holds temporary resistance. Also, if this level is confirmed as support, it is possible for gold to target $1,780 and $1,800. On the downside, $1,720 stands as important support. Only a daily close below this level can be seen as a significant bearish development. Besides, it is possible to open the door for more losses towards $1,700 and $1,675.
The FXStreet Forecast survey points to a neutral/bullish trend in the short term with the one-week average target remaining at $1,768. The one-month outlook paints a mixed picture. However, the quarterly outlook remains overwhelmingly bullish with a target of $1,801.
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