According to market analyst Haresh Menghani, a combination of factors helped the gold price gain some traction for the second consecutive day. The analyst states that Hawkish Fed prospects may prevent bulls from placing aggressive bets on the precious metal and investors are waiting for the US CPI report/FOMC meeting minutes for a new direction momentum. Haresh Menghani’s gold price analysis and evaluations cryptocoin.com we have compiled for you.
Stagflation concerns act as tailwind for precious metal, analyst says
Gold is trading in a tight range above $1,760, posting small gains until this Wednesday. Gold bulls took a breather towards US inflation and FOMC minutes. Despite the cautious market mood, the US dollar is correcting from yearly highs against its key peers, as investors melt dollar longs after the recent rally and before key event risks, according to analyst Haresh Menghani. The analyst reminds that higher US inflation will further push the Fed’s tapering expectations, which could possibly be negative for interest-free gold. The Fed’s September meeting minutes will also be watched closely for new clues from the world’s largest central bank on its next policy action.
Meanwhile, the gold price continues to gain support from rising stagflation concerns, especially in light of the International Monetary Fund’s (IMF) downward revision of its 2021 global growth forecasts. Gold is currently trading just above the $1,760 level, with a modest US dollar weakness being seen as a key factor giving some support to the dollar-denominated commodity. According to Haresh Menghani, the prevailing cautious market mood is acting as a tailwind for the safe-haven precious metal amid concerns about a return of stagflation. Investors are worried that the recent widespread rise in commodity prices will fuel inflation and derail the global economic recovery.
“A more hawkish Fed could provide new direction momentum for gold prices”
Meanwhile, a slight dollar pullback lacks any obvious fundamental catalyst and appears to have eased amid expectations that the Fed will begin reducing bond purchases in November. The analyst states that the markets started to price the possibility of a rate hike by the Fed in 2022 against the risk of excessive inflation, and this situation is evident from the increase in US Treasury bond yields, and makes the following assessment:
This should help limit any meaningful dollar declines and deter traders from aggressively buying around gold with no returns.
Investors now await the release of US consumer inflation figures to gauge the way the Fed normalizes monetary policy. This will be followed later by the minutes of the FOMC monetary policy meeting during the US session. A stronger CPI pressure and (or) a more hawkish Fed could bring additional gains for the US currency and give gold prices a new directional momentum, according to the analyst. Meanwhile, the analyst adds that he will look at broader market risk sensitivity along with US bond yields for some short-term trading opportunities around commodities.
Gold price technical analysis: Breaking the $1,750 support could lead to aggressive technical selling
From current levels, overnight highs around the $1,769-$70 region could continue to act as immediate strong resistance, with some follow-on buys potentially returning gold to the $1,783-84 horizontal barrier, market analyst Haresh Menghani says. Persistent strength beyond this could allow the bulls to aim to reclaim the $1,800 round figure mark. Haresh Menghani points out the following technical levels in his analysis:
On the other hand, the $1,750 area immediately emerged as a strong support. A convincing break below could lead to aggressive technical selling and accelerate a slide to September lows, around the $1,722-21 region. Gold could eventually decline to test the $1,700 mark, which is on its August course in the $1,687 region.
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