Gold reversed its decline to the $1,776 region in the early North American session and turned positive for the third consecutive day. But this fell below the weekly highs it touched earlier this Thursday. According to market analyst Haresh Menghani, the drive to avoid risk in the markets, currently hovering around the $1,780-83 region, has been a key factor acting as a tailwind for the safe-haven precious metal.
“DXY recovery limited gains in dollar-denominated commodities like gold”
cryptocoin.com As you follow in the news, investors are nervous over potential contamination from China Evergrande’s debt crisis. The heavily indebted company said Wednesday that its $2.6 billion real estate package had failed. However, market reaction has so far been limited on news that Evergrande has extended the maturity of the $260 million bond by more than three months. In addition, Chinese officials said that they do not expect the problems in the industry to turn into a full-blown crisis.
The analyst says the dollar-denominated commodity’s significant gains are capped by a good recovery from the US dollar’s three-week low. The dollar gained some support thanks to the rise in US Treasury yields. In fact, the benchmark 10-year US government bond yield hit 1.67%, the highest level since May, with the Fed’s early tightening expectations. This is seen as another factor limiting the upside potential of non-yielding gold, at least for now.
Investors assess the possibility of a possible rate hike in 2022
Despite signs of weakening economic activity, market participants seem convinced that the Fed will have to take more aggressive policy measures to contain persistently high inflation. Speculation seems unaffected by Fed chairman Randal Quarles’ comments that it would be premature to start raising interest rates in the face of high inflation, which is likely to decline next year. On the other hand, investors are evaluating the possibility of a possible rate hike in 2022.
As for economic data, weekly jobless claims in the US fell to 290,000 in the week ended Oct. This greatly helped offset the weaker-than-expected Philadelphia FRB Manufacturing Index, which had little impact on DXY and fell from 30.7 in September to 23.8 this month. Thursday’s US economic report also includes the release of current home sales data, but the analyst is unlikely to give gold prices any support.
Gold price technical view
From a technical standpoint, the golden bulls can still wait for steady movement beyond the $1,800 confluence limit before placing new bets, according to market analyst Haresh Menghani. The analyst states that the mentioned (handle) handle contains technically significant 100/200-day SMAs and if these are cleared definitively, it will lay the groundwork for additional gains. Haresh Menghani points out the following levels in his technical analysis:
The next relevant limit is set near the $1,808-1,810 zone, above which gold appears poised to accelerate momentum to challenge the $1,832-1,834 heavy supply zone.
On the other hand, any meaningful pullback is likely to find decent support near the $1,775 area, reminding that some trailing weaknesses could push gold prices back to the $1,763-1,760 region. The analyst continues his assessment as follows:
Failure to defend said support levels will remove any short-term positive bias and encourage aggressive technical selling. This would reveal the $1,750 support area before the gold price eventually declines towards September lows, around the $1,723-1,721 region.
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