Gold prices in terms of the US dollar (XAU/USD) extended the downward spiral into a fourth day on Monday and remained submerged in the red at fresh monthly lows of 1132.40. On daily charts, the prices fell below most major moving averages and closed at 1133.33, below the key Fib 61.80% (retracement of Sept 11-Oct 15 rally) level located at 1133.95. The ongoing Dec Fed rate hike speculations were further boosted by the above estimates US manufacturing PMI reports from both Markit as well as ISM released in the US session. The ISM said its PMI booked 50.1 last month, from a reading of 50.2 in September. While the latest final PMI reading from Markit hit a 7-month high, coming in at 54.1 in Oct, versus 53.1 seen in September.
Currently, the yellow metal trades within a shouting distance of the monthly lows and remains weak after the US dollar halted its corrective slide and resumed the recent upbeat momentum. Gold prices remain undermined as the last week’s FOMC reinforced Dec Fed rate hike bets, with markets now eyeing Friday’s crucial NFP report to seal in a Dec Fed rate rise. Hence, gold bulls are expected to remain on the back foot with the looming Fed lift-off. Also, Wednesday’s Fed Chair Yellen’s testimony could also shed fresh light on the Fed interest rate outlook. The non-interest bearing gold suffers the most in high-interest-rates environment. Later in the day, US factory orders will be reported, with markets expecting the drop in the orders to ease in Oct (-0.8% exp.) against -1.7% booked previously.
Technicals – $ 1120 in sight on USD rebound
On daily charts, the prices remain capped below the crucial 100-DMA located at 1138.40 and continues to consolidate to downside, below most major moving averages. The pair is seen clinging to the aforesaid Fib 61.80% levels in last hours. The daily RSI around 40 has turned flat from the previous upward tick. Thus, indicating further room for declines.
To the downside, the prices could once again test the Fib 61.80% support, below which a renewed sell-off is likely to trigger driving the prices towards the next support in sight at 1121-1122 region (Sept 22 & 23 Low). A breach of the last, the prices could test the Fib 78.60% (of the same rally) located at 1118.37 levels. The scope for further upside remains bleak so long as the prices trade below 1138-1140 levels, the confluence zone of the 100 and 50-DMA.
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