- A strong recovery in USD demand triggered an aggressive sell of gold on Friday.
- The USD got some support from high US bond yields and bullish expectations from the Fed.
- A softer risk tone could provide some support for the safe-haven metal and limit further losses.
Gold (XAU) saw aggressive selling during the early American session and fell to a week and a half lows, around the $ 1,776 area in the last hour. The US dollar was back in demand on the last trading day of the week and has now reversed a significant part of the depressing drop in US GDP the day before to a month-long lows. This, in turn, was seen as a key factor that weighed heavily on dollar-denominated commodities, including gold.
The USD maintained its strong intraday gains following the release of the softer-than-expected underlying PCE Price Index. The Fed’s preferred inflation gauge was flat near 30-year highs in September and stood at 3.6% year-on-year, versus consensus estimates of a modest rebound to 3.7%. The data indicated that consumer cost pressures are training and validating expectations that the Fed would be forced to adopt a more aggressive policy response to contain stubbornly high inflation.
technical perspective
From a technical perspective, the repeated failures near the $ 1,810-12 resistance zone and the subsequent slide suggest that the recent positive move has run out of steam. Therefore, some follow-up weakness to test the next relevant support near the $ 1,762 region remains a clear possibility. The corrective pullback from the multi-week highs could extend further towards the October monthly lows around $ 1,745.
On the other hand, any significant recovery now appears to face strong resistance near the $ 1,790-92 zone (100/200 day SMA confluence) and remain capped near $ 1,800. A sustained force beyond could allow the bulls to make a further attempt to break above the $ 1,810-12 barrier and push gold prices into the $ 1,832-34 offer zone.
Technical levels
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