Gold Price Forecast: Indecisive market, may attempt bullish breakout next week

Gold has been restricted largely to a narrow range of $1,500 to $1,480 since Monday and is about to end the week on a flat note at $1,491 per Oz. 

The market has turned indecisive despite global growth concerns. The International Monetary Fund (IMF) on Tuesday revised the 2019 global growth forecast lower by 0.2 percentage points to 3% – the lowest since the global financial crisis. The global economy is in a "synchronized slowdown, weakened by rising trade barriers and increasing geopolitical tensions", the fund said. The IMF added that the US-China trade tensions will cumulatively reduce the level of global GDP by 0.8% by 2020.  

Moreover, China on Friday reported the third-quarter Gross Domestic Product (GDP) growth at 6% – the lowest reading since 1992. Even so, the metal failed to draw haven bids, possibly because the global growth slowdown is generally accepted by now and priced to a large extent. 

Focus on Brexit and US Durable Goods

Gold will likely pick up a bid in the Asian session on Monday, especially in GBP and EUR terms, and the risky assets could take a beating if UK PM Boris Johnson's Brexit deal is rejected by the parliament on Saturday.

Johnson has said that the UK will leave the European Union if the parliament votes down his proposed deal. In an extraordinary Saturday sitting, the first since 1982, parliament will vote on approving Brexit deal. Britain is due to leave the EU on Oct. 31.

The US data docket is light except for Thursday when the Durable Goods (Sep) data will be released. A bigger-than-expected drop in corporate spending would underline the negative impact of the US-China trade war and bolster the Federal Reserve (Fed) rate cut expectations.

As of now, there is an 89.3% chance the Fed will cut rates by 25 basis points on Oct. 30, according to CME's FedWatch tool. So, it seems safe to say that 22 basis point rate cut has been priced in and the remaining three basis points will likely be priced in on potential weak US data. Put simply, the upside in gold on dismal Durable Goods data looks limited.

The metal, however, could suffer a significant drop if the Durable Goods blow past expectations, forcing markets to price out the 22 basis point worth of rate cut.

The European Central Bank's (ECB) rate decision is also due on Thursday. The bank is expected to keep rates unchanged and reiterate September's dovish stance, leaving markets largely unaffected.

Technical Outlook

Gold is trapped in a falling channel since early September, as seen in the daily chart.

The daily MACD histogram, a widely used indicator to gauge trend strength and trend changes, has charted higher lows - a sign of weakening bearish momentum.

The metal, therefore, looks set to challenge the upper edge of the bearish channel, currently at $1,510. A close higher would imply bullish breakout and a resumption of the rally from lows near $1,270 seen in May. Prices could then challenge resistance at $1,557 (2019 high).

The bullish case would weaken if prices drop below $1,474 (Oct. 11 low).

Gold Forecast Poll

The Forex Forecast Poll is a sentiment tool that highlights near- and medium-term price expectations from leading market experts which shows the immediate trend is bearish, while the monthly and the quarterly outlook for Gold is bullish. 

1 Week: Expecting sellers to make another push down towards 1450.0. 1 Month: Expecting price to pullback towards the price of 1440.0.

By Navin Prithyani