2023-10-04 05:30:00
The spot price of gold reaches only $15 following losing the crucial support of $1,800
It remains tied with an 11-month high versus a 7-month low for gold
The dollar index is looking at the 109 level, following breaching the widely watched 107 level
Spot gold is determined to stay above the $1,700 level
Markets are not treating the world’s favorite “safe haven” as if it were really the best, as the global economy trembles at the prospect of further fallout from inflation and higher interest rates. Instead the competitor takes first place, sitting on top of the current market turmoil.
It hit 7-month lows on Tuesday, holding key support ropes at $1,800.
Meanwhile, the “King Dollar,” as the US currency is called these days, is approaching an 11-month high on the XY, or DXY, which measures the US currency once morest six rival currencies – the Canadian, Swedish, and Sterling and Swiss.
Daily chart of the US dollar index
Charts provided by SKCharting.com, with data powered by Investing.com
Investors continue to rush towards the dollar at the expense of gold, with the US currency taking on the mantle of super-stability once morest the currencies of challenged economies – giving the kind of assurance everyone has been waiting for from gold.
Macro strategist James Stanley said that the theme of dollar weakness that prevailed through most of the second quarter may have been tested to the brink when bears pushed the dollar index below the key 100 support level in July.
In a comment posted on Forex.com, he said:
“This move might not continue and what started as a pullback has since turned into a historic run of strength in the DXY Dollar Index with 11 consecutive weekly gains for the first time since September 2014.
We can see the July collapse was met with failure, which then returned to strength in August and September.
After breaking 107, is DXY eyeing 109?
Sunil Kumar Dixit, a commodity chart expert with Investing.com, agreed, saying the DXY seemed to be on an “unstoppable rise,” adding:
“We have entered the 12th week of sustained upward advance, with DXY finally testing the critical area of 107.18, which is the 50% Fibonacci retracement level of the previous major bearish wave where it moved from 114.78 to 99.58. If this area serves as an effective resistance zone, it is likely that Markets are witnessing a decline to the 38.2% Fibonacci region at 105.39.
On the flip side, if the smart money supply continues to push towards the dollar above 107.20, a new wave of upside for the dollar will target the 61.8% Fibonacci area at 109.
While the dollar index has been on a tear since Friday, reaching an increasing frenzy following a number of Fed policymakers on Monday hinted at raising interest rates once more in November or December to keep the headline in check. And closer to the central bank’s target of 2% per year than the current 3.7%.
Fed Governor Michelle Bowman also said she would be willing to support another increase in the central bank’s interest rate at a future meeting if incoming data show that progress in inflation is stalling or going too slowly. Bowman added in statements prepared for delivery at a banking conference on Monday:
“It would probably be appropriate to raise interest rates further and keep them at a restricted level for some time. Inflation is still very high.”
Michael Barr, the Fed’s vice chairman for supervision, said the central bank will likely need to “keep interest rates high for some time.”
While US inflation has slowed significantly from a four-decade high of more than 9% annually reached in June 2022, the runaway price rise in recent months has raised concerns that non-oil-producing countries – which make up the bulk of the economy… Global – You will face a stressful burden once more at the end of the year.
What regarding gold then?
The yellow metal was moving almost in sync with the dollar, but only in the opposite direction.
At the time of writing, the most active gold futures contract on the Comex exchange in New York, for the month of December, was hovering at just under $1,837 an ounce, continuing the yellow metal’s eight consecutive days of falling streak in a defeat that has already cost long positions in the market nearly From 6%.
The US gold futures index fell 4% last week in its largest weekly decline since the week ending June 11, 2021. Comex gold also ended third-quarter trading down 3% following a 4% decline in the second quarter.
More importantly, the spot price of gold, which is reflected by actual trading in bullion and which some traders watch more closely than futures, was just above $1,821, falling in 10 of the 12 sessions.
While the percentage of losses in both futures and spot contracts were similar, what set the bullion index apart was its low for the day – $1,815.32 – which was just $15 from testing the $1,700 levels. The last time spot gold collapsed below $1,800 was in December 2022, when it reached $1,765.32.
Has gold lost its integrity? Or is he on the cusp of a rebound?
Although the yellow metal is weakening with each passing day, gold may have drawn its own red line in the market sell-off, warns Dixit, Chief Technical Strategist at SKCharting.com:
“If the DXY index maintains stability below the 107.20 resistance level, the possibility of spot gold falling below the 200-week simple moving average, or SMA, at $1,815, may be limited.
But also keep in mind that any recovery from the lows will face immediate resistance at $1845. Only by clearing this hurdle will gold be able to face the next challenges to the 100-week SMA at $1855, followed by $1865-$1875 and $1888.”
Also, the task of gold speculators will be easier if the dollar continues to rise in price unabated.
“If spot gold loses its hold at today’s low at $1,815 and the week’s close remains below that zone, bullion’s downside is expected to exceed the 61.8% Fibonacci zone at $1,790.”
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