Gold price after a sharp increase in the first half of the month ($1,617 – 1,787) entered into a slow correction to touch $1,725 with a 3.4% loss. However, again and with a weaker USD, gold could hold its strength and return above the uptrend line in almost all main timeframes.
Changing the sentiment from neutral to a slow uptrend is associated with doubts
In line with the US dollar, we could see the correction in the US bond Yields. The 10-year US treasury yielding started last week at over 3.83% at the beginning of the week and now it’s trading below 3.73%.
From last Wednesday till this Wednesday, we had different signals from Fed and its policymakers. While the minutes of the November 1-2, FOMC meeting were released last week and were more dovish than expected, and increased the pressures on the US dollar, Fed speakers since Monday this week repeated that tightening policies should continue, at least until 2023. Anyway, the published minutes also in fact confirm that there is no clear consensus among Fed policymakers at the moment, to send mixed signals to the market participants.
On the other hand, we will have the US labor market’s latest update this Friday, and if the labor market also shows weak signs, then with slower CPI and PPI in recent months, a slower interest rate increase by 50 basis points will be more likely. Slowing price pressures in the past three months somehow encouraged the Fed to pivot towards a less harsh policy, by reducing the pace of future rate hikes. These changes in the outlook, decreased the bond Yields in major economies, mostly in the US. Therefore, while assets yielding interest become a more appealing investment compared to gold as interest rates rise when you have fewer interest rates, gold demand increases.
If gold prices decline, which is less likely now, the next supports will be around $1,745 and then 1,725. Breaching under 1.725 also can open the doors for 1,615 US dollars. On the bullish move, the next Resistance sits at $1,785 and above that, $1,802 will be the main target.