Signal price

XAU/USD pullback eyes $1,630 support on firmer USD, Fed bets

  • Gold price is printing slight losses while reversing from the 1-week high.
  • DXY trims first in three weekly loss amid geopolitical concerns and market interference.
  • The absence of speakers from the Fed, the likely hawkish results from the ECB could test the XAU/USD bears.
  • The preliminary US PMI readings for October third quarter GDP are also important for near-term guidance.

The price of gold (XAU/USD) remains under pressure around the intraday low of $1,652, maintaining the early week pullback from a fortnightly high early Monday morning in Europe. In doing so, the yellow metal justifies the strengthening of the US dollar, as well as the cautious mood of the market.

The U.S. Dollar Index (DXY) rose 0.30% intraday to 112.25 at press time, amid talk surrounding Japan’s interference in the market to defend the yen, as well as challenges to risk appetite.

That said, the news that North and South Korea exchanged warning shots near their disputed western maritime border, released on Monday, also appears to have favored US dollar buyers lately. Along the same lines, one might fear that Chinese President Xi Jinping has no qualms about escalating geopolitical issues with the United States when it comes to Taiwan. The reason could be linked to Jinping’s dominating performance at the Communist Party’s annual congress after winning the third consecutive term. Additionally, ABC News quoted Ukrainian General Oleksandr Syrskiy citing fears of nuclear war, which in turn could have put buyers of US dollars back.

Recently, the news that China has announced a covid lockdown in the factory center of Guangzhou is weighing on market sentiment and XAU/USD prices. The latest jump in market bets on the Fed’s 75 basis point move in November from 88% to 95% also appears to have drowned gold prices.

Amid those games, S&P 500 futures are posting intraday gains of 0.50% while 10-year US Treasury yields remain bid around 4.17%, extending Friday’s losses from the high of 14 years old. That said, U.S. stocks have posted the largest weekly gains in four months in recent months as earlier fears of an aggressive Fed rate hike previously receded.

On Friday, the price of gold rose sharply while posting the first of three weekly gains as Fed hawkish bets retreat after a mixed Fedspeak. That said, St. Louis Fed President James Bullard said, “I want rates that put significant downward pressure on inflation.” Along the same lines, Chicago Fed President Charles Evans said they will have to raise rates further and keep them there for a while. However, Nick Timiraos, chief economics correspondent for the Wall Street Journal (WSJ) wrote that Federal Reserve officials are heading for another 75 basis point interest rate hike at their November meeting and will likely debate then whether and how to report plans. to approve a smaller increase in December.

Looking ahead, gold traders should expect further weakness amid risky markets and challenged confidence. However, the absence of Fed speakers and a likely hawkish outcome from the European Central Bank (ECB) could challenge the decline in XAU/USD.

Technical analysis

Gold price is pulling back from the 21-DMA hurdle amid bearish MACD signals and a slow RSI, which in turn suggests further decline in the metal towards the resistance line turned support from the Oct 06, around $1,630 at press time.

However, a monthly horizontal support near $1,620, quickly followed by the yearly low of $1,614, may challenge the gold bears thereafter. In a case where metal prices fall below $1,614, the $1,600 threshold and the 61.8% Fibonacci expansion (FE) of the June-October moves near $1,565 attract the XAU/USD bears.

Alternatively, 21-DMA and 50-DMA, around $1,665 and $1,694 in that order, protect the short-term rally in the price of gold.

After that, the round figure of $1,700 and the monthly high near $1,730 could be interesting to watch for further upside.

Gold: daily chart

Trend: Limited decline expected