Gold reversed its decline to the $1,776 region in the early North American session and turned positive for the third consecutive day. However, it fell short of the weekly highs it touched earlier this Thursday. According to market analyst Haresh Menghani, the drive to avoid risk in the markets currently hovering around the $1,780-83 region has been a key factor acting as a tailwind for the safe-haven precious metal.
“DXY recovery limited gains in dollar-denominated commodities like gold”
Cryptocoin. com, investors are nervous over potential contamination from China Evergrande’s debt crisis. The heavily indebted company said Wednesday that its $2.6 billion real estate package had failed. However, market reaction has so far been limited on news that Evergrande has extended the maturity of the $260 million bond by more than three months. In addition, Chinese officials said that they do not expect the problems in the industry to turn into a full-blown crisis.
Analyst says significant gains in dollar-denominated commodity are capped by the effect of a good recovery in US dollar from three-week low. The dollar gained some support thanks to the rise in US Treasury yields. In fact, the benchmark 10-year U.S. government bond yield hit 1.67%, the highest level since May, amid expectations for early tightening by the Fed. This is seen as another factor limiting the upside potential of non-yielding gold, at least for now.
Investors assess the possibility of a possible rate hike in 2022
Despite signs of weakening activity, market participants seem convinced that the Fed will have to take more aggressive policy measures to contain persistently high inflation. Speculation seems unaffected by Fed chairman Randal Quarles’ comments that it would be premature to start raising interest rates in the face of high inflation, which is likely to decline next year. On the other hand, investors are evaluating the possibility of a possible rate hike in 2022.
As for the data
, weekly jobless claims in the US fell to 290,000 in the week ended Oct. This greatly helped offset the weaker-than-expected Philadelphia FRB Manufacturing Index, which had little impact on DXY and fell to 23.8 this month from 30.7 in September. Thursday’s US k report also includes the release of current home sales data, but the analyst is unlikely to give any support to gold prices.
gold price technical view
From a technical standpoint, the golden bulls can still wait for steady movement beyond the $1,800 confluence limit before placing new bets, according to market analyst Haresh Menghani. The analyst states that the mentioned (handle) handle contains technically significant 100/200-day SMAs and if these are cleared definitively, it will lay the groundwork for additional gains. Haresh Menghani points out the following levels in his technical analysis:
The next relevant limit is 1.808-1. It is set near the $810 zone, above which gold is at 1.832-1. It appears poised to accelerate the momentum to challenge the $834 heavy supply zone.
On the other hand, any meaningful pullback is likely to find decent support near the $1,775 area, with gold prices showing some trailing weaknesses at 1.763-1. It reminds that it can pull back to the $760 region. The analyst continues his assessment as follows:
Failure to defend said support levels will remove any short-term positive bias and encourage aggressive technical selling. In this case, the gold price eventually fell to 1.723-1. It will reveal the $1,750 support zone before falling back towards September lows, around the $721 zone.