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Will Gold’s price continue to move downhill?


29 September 2021

Gold closed its third consecutive week in red territory breaking to new monthly low levels. Gold has also reached even lower in the current week, possibly setting the tone for some challenging daily sessions ahead. Despite the fundamentals from around the world making an interesting case for a more bullish appetite for the Gold market, traders seem to favor the opposite at this stage. This report will detail important information that could possibly move Gold’s price motivating traders to take action. At the final stage we will also present a technical analysis covering important technical levels for traders to use as guidance.

First we could make a start with the discussion over Gold’s bearish tendencies which intensified during the past week. A very notable selloff for the Gold market was carried out on the 23rd of September Thursday. The movement came just after the FOMC interest rate decision, future projections and accompanying press conference took place during Wednesday’s US session. The Fed made it clear that economic activity in the US continued to improve. A strong employment sector, higher inflation rates and hard hit areas of the economy recovering at a slow pace however, were some points the Fed used to support the notion that economic circumstances in the US have progressed.

Yet the Fed took it a step further noting that, based on the expectations that the economy could continue to advance, a moderation of its asset purchasing program, may be required. This small statement was something that market participants knew the central bank was considering, yet the fact that this was confirmed in the official FOMC statement tends to make it of huge importance as it immediately confirmed that the size of the Fed’s bond buying program is leaning towards becoming unnecessary. The news enforced negative pressure on Gold’s price during the following day, as US Bond yields started moving higher as a reaction to the statement. It would be worthwhile noting that the US bond yields are still ascending today the 28th of September.

In the past days, the greenback a source of antagonism for Gold’s price has been on the rise. Today according to the Dollar Index which monitors the USD’s strength against other major counter parts, the currency has risen to meet its 2021 high which was previously visited in August. The move tends to strengthen Gold’s selloff confirming the correlation between the two instruments remains mostly negative for the time being.

In the following days we have noted a list of important economic releases from the US that Gold traders may use as an accurate source of information. On the 30th of September we get the US GDP Final rate for Q2 and the weekly Initial Jobless claims figure. On the 1st of October an interesting day unfolds, as we get the Consumption Adjusted rate for August, the Final Markit Manufacturing PMI figure, the ISM Manufacturing PMI and the Final University of Michigan Sentiment figures all for September. On the 5th of October, we get the International Trade figure for August and the ISM non-Manufacturing PMI figure for September. Today, traders will be on the lookout for the Congressional testimony from U.S. Federal Reserve Chair Jerome Powell.

As a closure we could advise traders to keep an eye out for the ongoing investigation into Evergrande, the world’s most indebted property developer headquartered in Shenzhen. At the moment no impact on Gold’s price has been observed yet the matter remains under global surveillance and could impact the Chinese economy with the considerable amount of debt it carries.

Technical Analysis

With the latest downward session Gold has fallen below the (R1) 1742 level turning it into a resistance. The RSI indicator below our chart has made consecutive leaps lower but has not dropped below 30 for the time being, indicating the bears may still have some way to go before dominating the scene. In the scenario of a drop even lower the (S1) 1715 support can be tested first. Even lower the (S2) 1700 can also be considered as a possible target as traders may have in mind this round number level. If the price action is undertaken by the bulls then we may see the momentum turning upwards for the (R1) 1742 resistance initially, while even higher the (R2) 1760 can also be a target as it was tested in the past daily sessions but was not breached. Yet our highest level for this analysis remains the (R3) 1780 level which was also tested in the previous week but the price action eventually moved lower. In our personal view, the metal’s price is currently in a selling trend which is also confirmed by the downward trend line noted on our chart. If this red line is breached then the momentum could be changing to a sideways one with bullish tendencies.

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