Gold markets fell a little to slice at $1,680 during the trading week. According to analysts, as long as the Fed continues to tighten its monetary policy, you will likely see more.
“Golden bulls remain astonished”
Gold fell sharply on Friday as the Fed’s 75bps rate hike next month became more likely than expected. In a daily commentary, senior analyst Jim Wyckoff says gold continues to trade in a strong inverse relationship with the strong US dollar index (DXY). In this context, the analyst makes the following statement:
Gold bulls remain stunned by their failure to catch up with their metal’s safe-haven offer amid heightened geopolitical and market uncertainties.
“This does not bode well for yellow metal in the near term”
On Friday, data showed US retail sales fell flat in September. The University of Michigan study found that consumer sentiment rose to 59.8 in October from 58.6 in the previous month, and consumer inflation expectations for the next year fell to 5.1% from a one-year low of 4.7% in September. proved to rise.
Investors also headed for a higher peak for interest rates as the Fed battles stubborn inflation. Craig Erlam, Oanda’s senior market analyst, highlights the following in a note:
Inflation data was grim for the yellow metal as it reinforced a 75 basis point hike from the Fed next month. Not only that, markets may need to go further than previously anticipated, as inflation is apparently so stubborn. This does not bode well for gold in the near term. It is possible to test the lows near $1,640 once again soon. The next test after that includes the lows at the end of September.
Weekly gold technical analysis
Technical analyst Christopher Lewis illustrates the technical outlook for gold as follows. Gold markets fell heavily to break the $1,680 level once again during the trading week. This is an area that matters more than once. That’s why we’ve seen a lot of destruction done by slicing multiple times over the past few weeks. Whether we continue to see this market drop from here depends on the bond market and of course the Federal Reserve itself.
Looking at this chart, the hammer from a few weeks ago is something worth paying attention to. Because if we go down, then the market is likely to go down to the $1,600 level, maybe even the $1,500 level. As a result, this offers such potential resistance, especially the $1,750 level. So it’s a market I’m not interested in trying to buy anytime soon. If we break there, we can start discussing about some change in trend. However, I don’t think that will be the case at the moment.
This is a lower drifting market for some time now. Also, there is no reason to believe it will change. Ultimately, I like the idea of rally selling. Before I buy gold, I expect the Federal Reserve to change its overall stance. At this point it’s probably going to be a nice “take and hold” situation.
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