The XAU/USD pair (gold prices in terms of the US dollar) dropped for the second day in a row on Friday, although booked second weekly gain. The prices fell nearly $ 10 after the greenback swung higher after the US consumer sentiment rebounded from an 11-month trough. The UoM preliminary Consumer Confidence Index booked 92.1 points during Oct, compared to the final 87.2 seen in September. While the industrial figures from the US matched estimates (-0.2% in Sept). Moreover, the uncertainty over the Fed rate hike timing amid mixed US economic news also kept the bullion undermined. The prices breached the 200-DMA then located at 1176.50 and fell as low as 1174.37, before regaining 200-DMA at close.
As for today’s trade in running, XAU/USD is seen consolidating the last week’s rally to fresh multi-week highs for the third straight session, making for a weaker start to this week. The prices received a fresh blow from the latest Chinese data, with the above estimates GDP data failed to impress the gold traders. Moreover, weak industrial production and fixed assets data from China further added to the ongoing weakness in the economy and raised worries over the demand for gold from the world’s largest bullion consumer. Later in the day, the trading book is expected to remain light as there is nothing relevant in terms of economic data lined up for release. While the pair may take fresh cues on the rate outlook from the Fed officers’ speeches due later in the New York session. FOMC Member Brainard is due to deliver a speech at the Chicago Fed's outreach meeting. While Fed Member Lacker is scheduled to speak at the University of Richmond.
Technicals – A break below Fib 23.60% (Oct 2-15 rally), could expose $ 1160
On daily charts, the prices are seen clinging to the Fib 23.60% (Oct 2-15 rally) support placed at 1171.07, with bearish pressures likely to extend further amid returning risk-sentiment on rising European equities. The daily RSI hovers around 61 and points south, supporting the case for further declines. Hence, a breach of the last support, the prices could drop to the upward sloping 10-DMA located at 1163.38, which also coincides with the horizontal hourly 200-SMA. A fresh sell-off could be triggered below 10-DMA levels sending the prices towards the Fib 38.2% retracement of the same rally located at 1158.39.
However, a failure to breach the critical support near 1163 region, the prices could rebound higher towards the 200-DMA now located at 1176.20, beyond which doors would open for a retest of 1185-1190 – multi-week tops. Overall, a generalized intraday downside persists today as markets will continue to assess the Chinese data amid a better risk environment.
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