While USD officially touched its lowest in almost three months with the USD Index at 106.70, the gold price was also above $1,775 trying to touch the 3 months high. After USD weakness following the market reaction to the US consumer inflation and initial jobless claims, equities’ prices also increased. SP500 also after returning from its two years low seen on October 12, gained almost 6% just in the past 24 hours.
Can yellow metal catch $1,800 after three months?
Gold price, which was decreasing because of stronger USD and higher yields, now increasing because of weaker USD and lower Yields on US treasury bonds. Therefore, we must watch and follow these factors to find out the next moves. What we can see is that the market somehow overreacted to the inflation data. It is correct that inflation is decreasing, but it is still so high even at 7.7%. One of the main reasons for the price reduction is the hawkish policies that Fed and other central banks have made so far. We should not forget that there are concerns also that if Fed starts easing its policies, inflation will still decrease. This doubt was the exact reason for some of the FOMC members to support the higher rate hikes in the next meetings. Therefore, while a downtrend for the USD and an uptrend for the stock markets is more likely, at least until the next Fed meeting, apparently, there is not much room for gold price growth
From the technical point of view, in most charts, Yellow metal moves in a clear uptrend. The main resistance in the bigger pictures and longer timeframes sits at 1,800 USD (200 DMA), and it seems like the next target above current levels. However, moving above 200 DMA can change the overall market direction, otherwise, gold can return to its previous downtrend.
Do not forget that gold is a save-haven, too. Therefore, if we have a great return in the stock markets, it can lose its attractiveness for investors. On the other hand, with market risk increasing, the US dollar can get stronger and again cap the gold bulls. Therefore, to trust in a clear and stronger uptrend, we must be more cautious.