Gold moved higher for the second consecutive week and is currently trading at levels previously seen back in June. Even though the price action seems to have stabilized at higher grounds, Gold’s unpredictable and volatile nature is always present, maintaining its attraction for traders. In this report we will detail the most important from our perspective Gold fundamentals, as we aim to provide the best information for traders to make the most accurate decisions. As always Gold’s technical analysis will be included where trends and important levels will be identified.
As we had accurately predicted in our previous report, the most important event for the Gold market in the past week was the US inflation data released on the 10th of November. The data confirmed inflation continues to be on the rise in the US, both on a monthly and yearly basis.
The release enacted a strong bullish reaction for Gold’s price, as the instrument’s positive relationship to higher inflation rates, instantly came into play. In the next 30 minutes after the release, Gold’s price jumped approximately $30, displaying striking movement. However, on a separate note the USD’s correlation to Gold’s price seems to have reversed its normal course. The USD a traditional counter to Gold’s price is currently trading at a 16 month high price basically mirroring Gold’s recent surge. Thus, correlation between the two instruments has turned positive but may require caution when used by traders for signals, as it could be on and off in the short term. Another reading from the previous week that stood out from a Gold’s perspective was the Preliminary University of Michigan Consumer Sentiment for November that dropped substantially from 71.7 to 66.8. Some analysts argue that consumer sentiment has been impacted greatly and may remain soft by the ongoing rise of the inflation rates, especially as these circumstances are expected to follow us well into 2022. Gold moved higher upon release of the news and seems to have maintained this upward tendency in the most recent sessions.
From a different perspective comments by Richmond Fed President Thomas Barkin provided further light on the matters that the FOMC officials are currently focusing upon. When asked on the possibility of a rate hike Barkin replied he supports J. Powell’s comments on the matter stating “we will be patient but we will not hesitate”. Yet Barkin also noted that the Fed may require a few more months to monitor how economic developments will play out before considering such a decision. Moreover, Barkin noted multiple times in his interview that at the moment demand remains extremely strong, as excess savings by consumers remain intact. Yet from our point of view, some ambiguity over the next months was also evident in Barkin’s comments that may support a more bullish approach for Gold at the moment.
In the following days, economic data from the US could assist traders with making trading decisions. On the 18th of November we get the weekly initial jobless claims figure and the Philly Fed Business Index for November. On the 22nd of November we get the Existing Home Sales Figure for October while the very important 23rd of November will provide the Preliminary Markit manufacturing and services PMIs for November.
As a conclusion, yesterday’s virtual meeting between US President Joe Biden and Chinese President Xi Jinping found both leaders seemingly positive towards cooperation and communication. The positivity emerging from the meeting may invite some risk-on tendencies in the short run that can benefit Gold’s price.
At the moment Gold seems to remain in an upward trend line which is highlighted by the ascending colored line on our chart. The (S1) 1865 line that was used as a resistance previously has been clearly breached in the most recent sessions and the price action has now clearly stabilized above it. This moves implies the (S1) support level was considered by traders in the past and may continue to be used in the near term. Yet if the trend continues to be upwards then the next target could be the (R1) 1885 resistance. Our top levels for this analysis and in the scenario of a movement even higher are the (R2) 1905 line and the (R3) 1915 which where both previously seen in June and could be a great challenge for the bulls. In the opposite direction if Gold takes a dive as we noted the (S1) may be approached first while even lower the (S2) 1845 level can be reached. The lowest level for this report remains the (S3) 1825 support. The RSI indicator below our chart remains above 50 implying the buying orders are still in excess while the stabilization at higher grounds seem to be displayed with the vertical line forming nearby the 70 level.