- Gold bulls move in on a critical technical area on the daily chart.
- US data sink the US dollar further in a weaker US yield environment.
The gold price exploded in the New York trade around the disappointment in the US data. Gold has travelled between a low of $1,696.26 and $1,697.13 and is higher by some 2.13% on the day. The price is homing in on a 78.6% Fibonacci retracement on the daily chart, as illustrated below having already breached the golden 61.8% ratio in trade today.
US data missed expectations despite a September beat in S&P Global Manufacturing PMI. The Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers Index (PMI) arrived at 50.9 vs 52.2 expected and the prior 52.5 which was the catalyst for the sell-off in the greenback that was already being weighed by softer US yields. Boosting safe-haven demand for metals, U.S. manufacturing activity grew at its slowest pace in nearly 2-1/2 years in September. In turn, gold shot through resistance triggering stops along the way no doubt, exuberating a move into 270 pips to the highs of the day.
The US dollar has eased, helping demand for the greenback-priced bullion among overseas buyers. DXY, an index that measures the greenback vs. a basket of currencies is now down some 0.2% after falling from a high of 112.543 to a low of 111.470. This softness in the safe-haven currency has afforded gold some respite that has staged a mini-recovery after dropping to its lowest since April 2020 on Sept. 28. The benchmark US 10-year Treasury yields have also fallen and are now making an advance on key support structure:
This is supporting the demand for zero-yield gold.
However, analysts at TD Securities argue that ''gold prices remain in a strengthening downtrend, despite the recent respite afforded by the slump in USD. The risk of capitulation remains prevalent for the yellow metal moving into October, with strong data continuing to point to a more aggressive Fed rate path ahead.''
Gold technical analysis
The daily charts above illustrate the price's trajectory below trendline resistance, on the way to the 78.6% Fibonacci retracement level near $1,710/oz. If resistance holds, then the price would be expected to continue with its southerly trajectory. On the other hand, should the bulls stay committed, then a break of resistance structure could lead to a significant upside continuation as per the bullish harmonic crab pattern:
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.