Gold Price Falls To Monthly Low After Failing To Test 50-Day SMA

Gold Price Talking Points

The price of gold is carving out a series of lower highs and lower lows despite the knee-jerk reaction to the US Personal Consumption Expenditure (PCE) price index, and bullion appears to be on course to test the monthly low ($1617) as it reverses ahead of the 50-Day SMA ($1680).

Gold Price Falls To Monthly Low After Failing To Test 50-Day SMA

The price of gold is struggling to hold up amid the recent rebound in US Treasury yields, and the precious metal could follow the negative slope of the moving average if it fails to defend the yearly low ($1,615 ).

Going forward, the Federal Reserve’s November 2 interest rate decision could influence the short-term outlook for gold as the central bank is expected to implement another 75 basis point rate hike. , and the president Jerome Powell and Co. may continue to prepare U.S. households and businesses for higher interest rates as the Federal Open Market Committee (FOMC) appears to be on track to continue its bullish cycle through 2023.

As a result, the FOMC’s rate decision could weigh on the price of gold if the committee becomes more willing to pursue a very restrictive policy, but it remains to be seen whether the central bank will maintain its current approach to combating the risk. inflation as CME FedWatch tool reflects speculation of lower rate hike in December.

Source: WEC

In turn, a change in the Fed’s forward guidance could increase gold’s attractiveness, as the central bank recognizes that “it would become appropriate at some point to slow the pace of policy rate increases while assessing the effects of cumulative policy adjustments on economic activity,” and the precious metal could continue to defend the September low ($1615) should the FOMC proceed with a dovish rate hike.

That said, the price of gold may attempt to test the monthly low ($1617) test as it reverses ahead of the 50-day SMA ($1680), but the Fed’s rate decision may support the previous metal if the central bank plans to implement more modest rate hikes in the coming months.

Gold Price Daily Chart

Source: Commercial view

• Gold price is carving a series of lower highs and lower lows following the series of failed attempts to close above $1670 (50% expansion), and the precious metal may continue to follow the negative slope of the SMA at 50 days ($1680) as it reverses ahead of the moving average.
• Failure to defend the September low ($1615) along with a close below the Fibonacci straddle around $1601 (38.2% expansion) to $1618 (50% retracement) could push the price higher. gold towards the region of $1584 (78.6% retracement), with the next area of ​​interest around the April 2020 low ($1568).
• However, the price of gold may continue to follow the September range as it holds above the monthly low ($1617), with a move above the $1648 region (50% expansion) bringing back $1670 (50% expansion) on the radar.

— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong