Gold continues its losing way?

Gold Futures have continued their losing ways, refreshing the 3-month downchannel by reversing last week’s gains below $1,459.00.  The rejection of the 20-day SMA could alert market participants to the prospect of a move below the $1,445.00 which will shift the medium term outlook completely into a negative one.

The US Dollar was slightly changed last week and then underperformed against major currencies ahead of the weekend on the back of the mixed retail sales, weaker than expected production, the Empire State index, trade prices, and business inventories. However the USD outlook remains positive as the US economy seems to be in a much better shape than the European or Japanese ones.

Additionally, the data have been ignored, as the USD support came after the White House adviser Kudlow said US-China trade talks are in the final stages. Hence, the optimism over a trade deal, the support from accommodative central banks and the diminished fears over a recession, have boosted Wall Street at the start of what is likely to be a quiet week ahead of the Thanksgiving holiday.

The bullish momentum on Wall Street has seen record high, after record high. By emphasizing on the safe havens tough, with Gold (XAUUSD) being one of them, the risk-on conditions prevailed into the weekend, lifting stocks to further peaks, though weighing slightly on bonds and safe havens as the focus remained on trade hopes.

Meanwhile, momentum of this USD trend and hence XAUUSD trend as well, have also been waning with the Fed having cut interest rates three times since late July, though markets have now priced out further Fed easing. The CME’s FedWatch tool now shows 2.2% odds are being factored for a 25 bp hike at the December FOMC, having shifted from odds of over 20% for a rate hike at the latest meeting that were being factored before the release of the unexpectedly robust October employment report (released on November 1).

The Fed’s measure of the Dollar’s broad trade-weighted Dollar is at near 3-year highs. A continuation of Dollar firmness would likely keep XAUUSD overall bias to the downside. Both incoming US data and the Fed minutes on Wednesday are likely to reaffirm the Fed on hold view. This keeps the overall view of the USD bullish with the economy in a “good place” for now.

If this happens, Resistance of Gold set at $1,483.50 (20-day SMA), while a break above it could retest the 50-day SMA, at $1,491.77 and the upper trendline at $1,501.00.

On the flipside scenario though, the next Support level for XAUUSD is at $1,445.00, at November’s low , and at the confluence of the lower daily BB pattern. As mentioned above a move below the latter could open the doors to fresh low, with the next Support coming way lower at $1,430.00 and at the 200-day EMA, at $1,414.00.