Gold prices in terms of the US dollar (XAU/USD) almost retraced the entire rally seen in the first half of Oct on Wednesday, falling sharply to fresh monthly lows at 1106.41. The renewed sell-off in the yellow metal was triggered yesterday, after it failed to resist the Fib 78.6% levels at 1123.30 (retracement of Oct 2-15 rise). Fundamentally, what led to the $ 15 sharp drop in the bullion can be explained by the Fed Chair Yellen’s hawkish comments while testifying in the last US session. Yellen repeated that the committee sees Dec Fed rate hike possibility alive, while adding that no decision have been made on the same. Moreover, upbeat US ISM services and ADP report also added to bullish sentiment in the USD, hammering gold to just ahead of Oct lows.
In today’s trade so far, the bullion attempts a tepid bounce from multi-week lows and hovers around 1108.50 levels, with the upside capped near Sept 30 Low at 1111.60. The prices are expected to remain pressured as the Fed officers are now optimistic on the US economic outlook and see Dec meeting as a ‘live event’. Moreover, the odds of a Dec rate rise as indicated by Fed funds rate futures contract on CME have risen to 58%, from about 45% seen after the latest FOMC meeting, the CME Group's FedWatch tool showed on Wednesday. Later in the day, Fed speaks and the US weekly unemployment claims will be released which may further talk up Dec lift-off and further pressure gold towards 1100 barrier. While the main decisive factor, which may confirm Dec rate hike, the non-farm payrolls data, is due to be reported on Friday.
Technicals – A break below $ 1100, targets $ 1080
On daily charts, the pair has formed a small doji and languishes within a shouting distance of the fresh monthly lows reached yesterday. The daily RSI at 31 points slightly lower supporting further southward moves. Hence, a breach of 1106-1104 levels (Nov 4 & Oct 2 Lows), the floors open for a test of 1100 – psychological barrier. Selling pressure will intensify below the last, taking the prices further towards 1080, the confluence of August lows and Fib 127.20% (of the same rally). In case the prices manage to hold 1100 threshold, a minor recovery could be attempted towards 1115-18 levels above daily highs. However, the upside seems limited as the ongoing Dec Fed talks continue to dent gold, which a non-interest bearing asset.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
AUD/USD rises to two-day high ahead of Aussie CPI
The Aussie Dollar recorded back-to-back positive days against the US Dollar and climbed more than 0.59% on Tuesday, as the US April S&P PMIs were weaker than expected. That spurred speculations that the Federal Reserve could put rate cuts back on the table. The AUD/USD trades at 0.6488 as Wednesday’s Asian session begins.
EUR/USD holds above 1.0700 on weaker US Dollar, upbeat Eurozone PMI
EUR/USD holds above the 1.0700 psychological barrier during the early Asian session on Wednesday. The weaker-than-expected US PMI data for April drags the Greenback lower and creates a tailwind for the pair.
Gold price cautious despite weaker US Dollar and falling US yields
Gold retreats modestly after failing to sustain gains despite fall in US Treasury yields, weaker US Dollar. XAU/USD struggles to capitalize following release of weaker-than-expected S&P Global PMIs, fueling speculation about potential Fed rate cuts.
Ethereum ETF issuers not giving up fight, expert says as Grayscale files S3 prospectus
Ethereum exchange-traded funds theme gained steam after the landmark approval of multiple BTC ETFs in January. However, the campaign for approval of this investment alternative continues, with evidence of ongoing back and forth between prospective issuers and the US SEC.
Australia CPI Preview: Inflation set to remain above target as hopes of early interest-rate cuts fade
An Australian inflation update takes the spotlight this week ahead of critical United States macroeconomic data. The Australian Bureau of Statistics will release two different inflation gauges on Wednesday.