Gold slumped the hardest since Sept. Analysts at the ANZ bank say the market immediately began pricing in an increase in asset purchases and a rise in interest rates, which had dwindled through June, and gold sold sharply as 10-year rates climbed over 8 basis points.
“Fed minutes will be a major event for dollar and gold”
According to market analyst Anil Panchal, gold has been somewhat supported by rising stagflationary headwinds. TD Securities analysts make the following assessment:
This result catalyzed a breakout from an all-time high and a multi-month downtrend amid a significant wave of CTA closings and an uptick in China’s gold appetite. We note, however, that the contention between high inflation pressures and market pricing for central bank hikes is not settled definitively.
Going forward, the analyst reminds that the Fed minutes will be an important event for the dollar and the yellow metal, and states that markets will look for more clues about the timing of a rate hike based on how fast the Fed is likely to contract. The evaluation of TD Securities analysts is as follows:
The minutes will undoubtedly reflect a range of views on the risks, but most officials feel they are in no rush to raise interest rates given the large net drop in employment and the anticipated slowdown in inflation.
According to the analyst, Covid-19 fears are causing the market to turn towards the US dollar
cryptocoin.com As we reported, US President Joe Biden’s decision to appoint Jerome Powell as Chairman of the Federal Reserve (Fed) for another term revived the market sentiment the previous day. Traders’ enthusiasm amid hopes of faster tapering and rate hikes in 2022 supported US Treasury yields, which pushed the US Dollar Index (DXY) to multi-day highs and dragged gold prices down.
Meanwhile, the analyst said that stronger US data on manufacturing and housing, released on Monday, also put downward pressure on gold. The US Chicago Fed National Activity Index rose 0.76% in October, compared to -0.18% (downward revised figure). Additionally, US Existing Home Sales reached 6.3 million last month, beating the forecast of 6.2 million and prior data of 6.29 million.
According to the analyst, US Treasury Secretary Janet Yellen, like in the 1970s, ruled out inflation fears, allowing gold traders to lick around $1,800. Even so, inflation fears remain on the table as billions of dollars in US stimulus are on the way. Additionally, the analyst comments:
Fears of new Covid-19 in the Eurozone threaten the persistent global supply chain and cause the market to gravitate towards the US dollar as it is a safe haven, as well as exacerbating the inflation pressure.
Amid these games, US 10-year Treasury yields rose more than the previous week’s loss in a single day, while DXY jumped to its new highest level since July 2020. The analyst underlines that the preliminary data of November PMIs for the UK, Eurozone and the USA will be important to watch for a new momentum.
Gold technical analysis
According to market analyst Anil Panchal, not only a U-turn from the annual resistance line, but also a bearish break of the four-month horizontal support makes gold sellers hopeful to visit the convergence of the 100 and 200 DMA. The analyst states that the not oversold descending RSI line and bearish MACD signals support the sellers of the horse and continues his analysis in the following direction:
However, it should be noted that gold’s weakness near $1,794-$92, which has crossed the DMA convergence, will be challenged by the 38.2% Fibonacci retracement (Fibo.) in the January-March period, with the drop around $1,784. In a situation where the golden bears continue to cross $1,784, a support line that has so far risen from $1,755 from August will be in focus.
Meanwhile, the 50% Fibo $1,819 level, if any, could challenge gold’s corrective retracement before the stated support-resistance level at $1,834. Even if bullion prices surpass $1,834, the 61.8% Fibonacci retracement level near $1,851 and the annual resistance line near $1,868 will test gold buyers.
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