Gold is rebounding from the three-week low it touched this Thursday. Europe maintains its modest gains in the first half of the session. But a meaningful upside move still looks elusive. Credit Suisse says gold will come under pressure again.
“We expect the gold price to come under pressure again”
Gold strengthened its “double top”. Strategists at Credit Suisse expect the yellow metal to weaken further. In this context, strategists make the following assessment:
Gold below $1,691/76 strengthened its current major ‘double top’. Therefore, we expect gold to come under pressure again, with a decent top. The next support stands at $1,614, then $1,560. However, we note that it was eventually seen at $1,451/40.
Only a convincing weekly close above $1,712 is likely to ease the pressure, according to strategists. From this point of view, strategists make the following statement:
Only a convincing weekly close above the 55-day average of $1,712 is likely to ease the pressure on the precious metal. The next resistance is at the more important 200-day average of $1,817. Moreover, we expect this figure to be the highest level.
What will be the effects of macro developments on the yellow metal?
The US dollar is pulling down and reducing some of the previous day’s strong gains. Apart from that, there are growing concerns about a deeper global economic downturn. Also, the prevailing cautious market mood is acting as a headwind for the safe-haven precious metal.
However, prospects for a more aggressive policy tightening by major central banks are limiting any meaningful upside movement in non-yielding gold, according to market analyst Haresh Menghani. Markets are pricing in jumbo rate hikes by the European Central Bank and the Bank of England. It also expects the Federal Reserve to stick to the aggressive rate hike cycle.
cryptocoin.comAs you follow, CME’s FedWatch tool gives an almost 100% chance of a fourth consecutive 75 bps rate increase at the next FOMC policy meeting in November. The bets were reaffirmed by recent hawkish statements from several Fed officials reiterating that they are committed to the US central bank’s aggressive fight against rising prices.
This pushed the yield on the interest-sensitive 2-year US government bond to a new 15-year high. In addition, the benchmark 10-year Treasury bond rose to its highest level since the 2008 financial crisis. The analyst notes that rising US bond yields will likely limit any meaningful USD decline. He says this shows that the path of least resistance for gold is to the downside.
Market participants are now looking at the US economic report, which includes the Philly Fed Manufacturing Index, Initial Weekly Jobless Claims and Current Home Sales. This, along with speeches from influential FOMC members and US bond yields, will drive demand for USD. Apart from that, it is likely to add some momentum below the broader risk sentiment.
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