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Gold traders expect US inflation data

10 November 2021

Gold jumped to a new monthly high in the past sessions reaching now levels previously seen back in September. Gold’s three latest daily sessions consisted of consecutive bullish movement that was very evident. Gold traders leave behind an interesting week and look ahead to another one of similar importance. In this report we will be looking into Gold’s price action and the fundamentals driving it, while at the end we will be closing with a technical analysis providing important levels for traders to be mindful of.

Starting with a short briefing of the previous week, which included two key economic events for the US economy. First, the latest FOMC meeting where the committee kept its interest rate at 0 to 1/4 percent while announcing simultaneously it would start tapering its QE program moving into December. Even though Gold was down in the hourly sessions prior to the meeting, as we got closer to the release, the precious metal started rising and formed a trend that would persist in the later sessions and the next week.

The Fed’s comments on improved economic circumstances, especially for the sectors most adversely affected by the pandemic, may have formed a risk on sentiment for investors as along with Gold’s price rising, the major US stock markets were also up. Also during the previous Friday the US employment report sent very positive signals for the labor market, with a bigger than expected NFP figure and a larger drop of the unemployment rate towards the desired target. Yet the greenback took a dive after the release of the figures witch may have pushed Gold prices even higher making it the most profitable day so far in November for the metal. Characteristically we must note that the USD reached a new yearly high in the past week while Gold prices are also on the rise. Thus we could note the adverse relationship between Gold and the USD is very questionable for the time being and traders using this method as an approach to place orders should be cautious.

XAU/USD H4 Timeframe

In the days ahead a number of financial releases are available for Gold traders to use as possible indications for price direction. First and most important are the US inflation rates for October that will be released on the 10th of November and are expected to keep Gold traders busy. Gold has traditionally been used as an instrument for higher prices thus we expect Gold’s price to develop volatility before and after the release. In our view, if the US inflation rate are to accelerate then Gold’s price may experience some bullish tendencies. On the same day and at the same time, we also get the weekly US initial jobless claims figure which is a reading worthy of keeping in mind as Gold could be sensitive to any reading beyond expectations. In the following week traders will have a very busy day on the 16th of November as the US Retail Sales and Industrial Production rates for October are imminent.

As a final comment, very interesting were Fed Vice Chair Richard Clarinda’s comments on the 8th of November as he spoke on the prospects for the U.S. Monetary Policy. Clarida referred to the economic conditions reaching levels in line with the committee’s projections, then rate hikes could be a possibility within year end 2022. However, the speed of the recovery may be enhanced in our view, as in the next month’s circumstances may be more favorable as the pandemic subsides.

Technical Analysis

As Gold has managed to break above the (S1) 1815 level turning it into a support, traders may now be focusing at higher lines, possibly at the (R1) 1835 resistance level. This opinion can be based on the fact that Gold remains in an upward trend line since the 4th of November until the present moment. A possible move above the (R1) could make way for the (R2) 1845 to be tried while this level has not been come across since June. At the top we tend to keep in mind the (R3) 1860 line. A test of either the (R2) or (R3) level would signal a breach above the highest price tested for the past months and can be used as a strong bullish indication.

On the contrary, if traders support a more bearish scenario then we consider the (S1) 1815 support as the first level to be tested while a continuous selling momentum can send the price action to our (S2) 1800 round number level.

A breach below the (S2) could change our bullish view to a sideways one while in that case the (S3) 1785 can also be considered as a target. For the time being the RSI indicator below our chart runs across the 70 line implying the buyers far exceed the sellers. Yet the stabilization there, can also invite some temporary bearish tendencies in the very short term. In this case the range between the (R1) and (S1) can be used by traders.


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