Market analyst Dhwani Mehta says gold is expanding its battle against the 21DMA as the US dollar recovers. The analyst notes that the US’s 3rd quarter GDP may give new clues about the talks of a potential Fed pivot. Also, the analyst says that gold is facing south amid bearish techniques. In this environment, Şahin sees the ECB increase as likely to be the catalyst. We have prepared Dhwani Mehta’s market comments and gold price technical analysis for our readers.
“Gold price is looking for a clear directional trend!”
cryptocoin.comAs you follow, gold price is looking for a clear directional trend, stopping its two-day rally to $1,700 as investors prepare for critical events this Thursday. The US dollar is generally rebounding a bit after the relentless selling so far this week. There are growing expectations that the Fed will downshift in rate hikes. This exacerbated the pain in US Treasury yields along the curve. It also turned into a long-term sale on the dollar.
Meanwhile, 10-year US interest rates hit the critical 4% level. It eroded about 25 basis points in two days. The Bank of Canada’s (BOC) pigeon rate hike decision shows that the slowdown in the global tightening race has begun. Therefore, it also negatively affected the US dollar, suggesting that the Fed may soon follow the same path. The BOC raised interest rates by 50 bps versus the expected 75 bps. This took the markets by surprise.
The recent series of negative US Manufacturing and Services surveys, combined with weak housing data, is fueling concerns about the health of the world’s largest economy. Thus, although it is ready for 75 bps in November, a possible dove slip from the Fed increases its risks.
“Gold likely to return to monthly lows”
However, all eyes are now on the US Q3 GDP data, with an expected recovery of 2.4% on a quarterly basis compared to the previously reported -0.6%. Stronger-than-expected data is likely to undermine Fed expectations. It is also possible that this will save the dollar bulls from the recent decline. Therefore, the gold price may stop the recovery mode. Also, gold is likely to turn south towards monthly lows.
However, the ECB’s decision to raise rates will also be crucial for determining the next price direction for the dollar and the yellow metal. A hawkish 75bps rate hike from the ECB is likely to trigger recession fears. That bodes well for the safe-haven dollar. The yellow metal looks to be in a lose-lose situation towards the next big day.
Gold price technical view
Gold price faced stiff resistance at the 21-Day Moving Average (DMA), currently $1,669. The 14-day Relative Strength Index (RSI) remains below the middle line, maintaining the downside trend. Failure to find acceptance above 21DMA will require testing the previous day’s low of $1,650. The next cushion holds Tuesday’s low at $1,638.
Selling pressure will likely intensify below the latter. Thus, it will open the bottoms for a fresh drop towards the monthly low of $1,617. Alternatively, the bulls need to find a solid footing above the 21DMA to prolong the renewed uptrend. Further higher, Monday’s high of $1,671 will kick in. The next upside target is settled towards the $1700 threshold, with the October 13 high of $1,683.
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