Article by: ETO Markets
Gold fell under pressure for a sixth straight day on Wednesday as expectations of a sharp interest rate cut by the US Federal Reserve in November receded, undermining the safe-haven metal's appeal. Meanwhile, the U.S. dollar index (DXY) continues to hover near Friday's seven-week high, acting as a major factor in the pressure on gold prices. Investors now await the release of the minutes of the Fed's September meeting, which together with US inflation data (Consumer price index CPI and Producer Price Index PPI) on Thursday and Friday will provide clues on the Fed's future rate cut path and influence the direction of the dollar in the short term.
At the same time, news of a possible ceasefire between Hezbollah and Israel also weakened demand for safe-haven assets, putting downward pressure on gold prices. While geopolitical tensions remain, hopes of a ceasefire have eased market sentiment slightly, reducing buying demand for safe-haven gold. In addition, the US 10-year Treasury yield continues to hover above 4%, putting further pressure on non-yielding gold.
From a technical point of view, gold broke below the $… support level on Tuesday, which is the lower boundary of the short-term trading range, triggering a new bearish signal. That said, oscillators on the daily chart show a weakening of mobilization energy, but the negative bias has not yet been fully confirmed. As a result, further declines in gold prices need to wait for a break below the $… level before larger technical selling may occur. A break below this level could lead to a continuation of the correction to the $… area, which in turn could test the $…-… support area, which could eventually hit the psychological $… level.
Conversely, if gold rebounds, the support breakout of the above trading range ($…-$… area) could now become an immediate resistance level in the near term. Any subsequent upward movement could be seen as a selling opportunity and could meet resistance near $…-…. If the bulls can push gold above this level on a sustained basis, it could challenge the $…-$… supply zone and further test the all-time high of $…-$… set in September. A break above the $… psychological level could set the stage for a multi-month uptrend.
