151 shares, 364 points
  • Golden prices rose on yellow on Friday, but then lost their strength.
  • Neither sellers nor buyers have control of the critical $1,800 level.
  • In a busy week, the first forecast for US third quarter GDP growth stands out.

After the sharp decline seen on Friday, gold prices have started the new week calmly. However, he had no difficulty in assessing the selling pressure around the dollar. After posting impressive gains on Wednesday, gold prices in yellow remained in the consolidation phase on Thursday and continued to rise ahead of the weekend. Gold surged above $1,800 on Friday, attracting buyers. However, the US quickly erased most of its daily gains in the late session, ending the week in positive territory above $1,790.

What happened in the gold market last week?

Disappointing growth data from China demoralized the market at the beginning of the week and pushed the dollar higher. But Monday’s optimistic earnings numbers from major US banks helped Wall Street’s main indexes gain momentum and capped XAU/USD’s losses, allowing risk flows to dominate financial markets. In the absence of top macro data releases, risk perception remained the main driver of financial markets on Tuesday.

Gold prices rose above $1,780 due to broad-based USD weakness, but rising US Treasury bond yields forced the pair to cut its gains. The rally in US stocks gained momentum mid-week, while gold prices gathered yellow bullish momentum and climbed to fresh weekly highs above $1,790. Data from the US on Thursday showed weekly Initial Unemployment Claims dropped to 290,000, the lowest since March 2020, and the S&P 500 Index hit a new record high of 4,551.

Towards the end of the week, the benchmark 10-year US Treasury bond yield rose, but despite this, the dollar had difficulty in finding demand as a safe haven. Increasing optimism about US lawmakers’ agreement on US President Joe Biden’s spending and news of Chinese real estate giant Evergrande’s $83.5 million bond interest payment boosted the market mood as the week closed.

These developments affected the gold prices in the past week.

Ahead of the Federal Reserve’s blackout period, which will begin on October 23, some policymakers have voiced their support for the contraction to begin in November. However, market participants showed little or no interest in these comments. Cleveland Fed Chairman Loretta Mester and Fed Chairman Randal Quarles said the contraction test was met, while Fed Chairman Christopher Waller argued that they may need to act faster if inflation remains too high.

Helped by the sharp correction in US T-bond yields and renewed dollar weakness on Friday, XAU/USD climbed above $1,800 and hit $1,813, its highest level since early September. However, the profits made before the weekend and the hawkish comments of FOMC Chairman Jerome Powell caused the pair’s rally to come to an end at the end of the American session. Powell noted that they expect high inflation to continue until next year, adding that it is time to contract.

Which developments are important for the yellow gold prices next week?

September New Home Sales and Conference Board’s October Consumer Confidence Index data will appear in the US newsletter on Tuesday. The market reaction is likely to remain muted as investors stay on the sidelines ahead of major events. On Thursday, the European Central Bank (ECB) will announce its Interest Rate Decision and will publish the Monetary Policy Decision Statement. During the last week, ECB officials reiterated that the increase in inflation in the euro area is expected to be temporary and noted that they will continue the expansionary policy even after the Pandemic Emergency Purchase Program (PEPP) ends in March.

In addition, Bundesbank Chairman Jens Weidmann, who has been loudly criticizing the ECB’s dove policy, announced his resignation at the end of the year. According to analyst Eren Şengezer, if the ECB event highlights the policy difference with the Fed, the dollar may regain its strength and reveal XAU/USD weakness. More importantly, the US Bureau of Analysis will publish its first forecast for third quarter Gross Domestic Product (GDP) growth. On an annual basis, GDP is expected to grow by 3.2%, following the 6.7% growth recorded in the second quarter. A GDP reading close to market consensus could trigger a fresh rise in US T-bond yields, given the disappointing September NPL data failed to change expectations for contraction.

Indicator 10-year US T-bond yield, critical 1%. It remains within touching distance of 75, and a break above this level could open the door for additional strengthening of the dollar. On the other hand, a large loss could cause investors to fudge the Fed’s delay in reducing their asset purchases and put heavy pressure on the dollar. Finally, the Personal Consumption Spending (PCE) Price Index, the Fed’s preferred inflation indicator, will be the last data of the week to be watched on Friday. However, if the trend has already been determined by previous events, these data alone are unlikely to have a significant impact on XAU/USD.

What levels will the gold prices see in the yellow week?

Although the Relative Strength Index rose to 60 on the daily chart, according to analyst Eren Şengezer, it is difficult to say that gold prices will rise. The SMA and the 200-day SMA meet. Above this hurdle, the $1,825/30 area (38.2% Fibonacci retracement of the April-June uptrend, static level) could be seen as the next target before $1,840 (static level).

On the downside, $1,780 (50-day SMA) for gold prices and yellow is aligned as initial support ahead of $1,770 (former resistance, Fibonacci 61.8% retracement). Sellers will remain in control of the market as long as the above-mentioned resistance persists.

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