The XAU/USD pair (gold prices in terms of the US dollar) reversed previous gains and ended in the red on Wednesday at 1145.25, just ahead of the 100-DMA support then located at 1143.22. The pair failed once again near the falling trend line resistance and hence did not trigger a symmetrical triangle bullish break out on closing basis. The prices jumped from fresh two-week highs of 1153.74 and dropped to as low as 1141.88 levels after the US dollar managed to recover some lost ground amid a data-deficient US macro calendar. Moreover, the gains on the global equities also dulled gold’s appeal as an alternative yielding asset.
As for today’s trade so far, XAU/USD extends its bearish bias, although managed to regain the 100-DMA barrier now located at 1142.60. Markets resorted to profit-taking after the recent run of gains, repositioning ahead of the key FOMC minutes, which further dragged gold prices lower. Later in the day, the US weekly jobless claims are expected to have minimal impact on the bullion as the main focus remains on the Fed minutes, which might set the tone for gold prices until the Oct 28 Fed meeting. FOMC minutes are largely expected to be read as dovish after the Fed at its Sept 17 meeting refrained from raising rates and raised worries over the global economic outlook.
Technicals – a symmetrical triangle bullish break out on dovish Fed minutes?
On daily charts, the prices slipped below the Fib 78.60% resistance (last week’s fall) located at 1145.54 and found support at 1140 – psychological levels and extends its recovery beyond the 100-DMA. The daily RSI now around 57 has turned slightly flatter, suggesting correction seems over and the prices could swing back high. Should the Fed minutes turn out be more dovish then expectations, the prices could accelerate to the upside and retest the falling trend line resistance placed now placed at 1151.02, beyond which the next barrier at 1156.70 (previous highs) could come into the picture.
To the downside, a less dovish surprise could offer some temporal support to the USD bulls and drag prices the pair towards the key Fib 61.80% support located at 1136.52, below which the confluence zone of the 20-DMA and Fib 50% of the same decline near 1130 could be tested. Overall, a generalized intraday upside bias persists for the bullion amid expectations of a dovish FOMC minutes.
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