The golden bears regain control as they enter the European session on Monday, down 0.36 percent on the day near $1,748, ahead of key weekly events, according to market analyst Anil Panchal. At the same time, the yellow metal beats its lowest level in five weeks amid negative risk sentiment.
Tapering probability determines the direction for gold price
Analyst Anil Panchal says that despite the banking holidays in Japan and China, Evergrande-related stock woes and cautious market sentiment before the Fed support the US Dollar Index (DXY), respectively, and put pressure on the yellow gold prices. The analyst also stated that the COVID-19 fears and concerns regarding the US incentive and the debt limit also forced the mood in the markets, making the following assessment:
Increasing optimism about the US stimulus and the expansion of the US debt limit series to ensure a slow but gradual recovery illuminates the Fed’s tapering possibility and supports double bears. In addition, escalating tensions between China and its Western allies, namely the US, Australia and the UK, are also weighing on market sentiment and bolstering the safe-haven demand for the US dollar.
Cryptocoin. com, recently, Axios reported that US Senator Joe Manchin supports President Joe Biden’s postponement of the spending package vote to 2022. On the contrary, Speaker of the US House of Representatives Nancy Pelosi said she expects a two-sided approach to addressing the debt limit, according to Reuters. Also, Bloomberg, citing an editorial in the Wall Street Journal (WSJ), reported that US Treasury Secretary Janet Yellen recently renewed her call for Congress to raise or suspend the debt ceiling in October. Therefore, doubts about the money flow and spending limits in the USA continue to push the mood of the markets.
Global developments and their possible effects on gold
Also, fears of a Lehman-like collapse of China’s Evergrande amid $300 billion in debt and 1,300 projects in more than 280 cities, as well as multiple links abroad, are straining market sentiment. Amid these games, S&P 500 Futures are down 0.80% on the day at press time, while the US Dollar Index (DXY) is up 0.15% on the day at press time, hitting a one-month high near 93.33.
Anil Panchal notes that going forward, a drop in China and Japan could trigger the precious metal’s corrective pullback near the short-term key support, but ahead of the Federal Open Market Committee (FOMC) on Wednesday, the bearish outlook remains intact.
Golden technical analysis: Corrective pullback expected
According to market analyst Anil Panchal, the descending bearish divergence of the MACD and the oversold RSI line has challenged gold sellers recently, but a downward trend line near $1,750 from last Wednesday makes them hopeful. Therefore, the analyst expects a clear downside break of the new sales, the 61.8% Fibonacci retracement of the August-September recovery around $1,744, and points to the following levels in his analysis:
Following that, the August 09-10 low near $1,723 and the rounded figure of $1,700 will challenge the golden bears before leading commodity prices to yearly lows near $1,687. Alternatively, a corrective pullback beyond the stated resistance line near $1,750 would target the latest top near $1,768 before heading towards the late August $1,780 levels. It’s worth noting that $1,800 and $1,822-$23 could entertain the bulls before emphasizing the monthly top again tested around $1,834 in July.