Gold price falls to a one-month low after failing to test the 50-day SMA

Gold price discussion topics

The the price of gold carves out a series of lower highs and lows despite the knee-jerk reaction to The price index of personal consumption expenditures (PCE) in the United Statesand bullion appears headed for a test of the monthly low ($1,617) as it reverses ahead of the 50-day SMA ($1,680).

Gold price falls to a one-month low after failing to test the 50-day SMA

Gold prices are struggling to hold on to the recent rebound in US Treasury yields, and the precious metal could be tracking a negative slope of the moving average if it fails to defend the annual low ($1,615).

Looking ahead, the Federal Reserve’s interest rate decision on Nov. 2 could weigh on gold’s near-term outlook, as the central bank is expected to raise rates by another 75 bps and Chairman Jerome Powell and Co. may continue to prepare US households and businesses for higher interest rates Federal Open Market Committee (FOMC) appears to be on track to extend its hike cycle to 2023.

As a result, the FOMC’s rate decision could weigh on gold if the committee shows a greater willingness to pursue highly restrictive policy, but it remains to be seen whether the central bank will maintain its existing approach to fighting inflation as CME’s FedWatch tool reflects expectations for fewer rate hikes in December.

Source: CME

In turn, a shift in the Fed’s forward-looking guidance could boost gold’s appeal as the central bank acknowledges that “it would be appropriate to slow the pace of rate hikes at some point while assessing the impact of aggregate policy adjustments on economic activity,” and the precious metal may continue to defend the September low ($1,615) when the FOMC raises the key rate.

That said, the gold price may try to test the monthly low ($1,617) if it breaks ahead of the 50-day SMA ($1,680), but the Fed’s rate decision could support the previous metal if the central bank plans to implement smaller rate hikes in the near term. months.

Daily gold price chart

Source: Trade view

• Gold price is carving a series of lower highs and lows after a series of failed attempts to close above $1,670 (50% extension), and the precious metal may continue to retrace the negative slope of the 50-day SMA ($1,680) as it reverses ahead of the moving average.
• A failure to defend the September low ($1,615) along with a close below the Fibonacci retracement around $1,601 (38.2% extension) to $1,618 (50% retracement) could push the gold price towards the $1,584 region (78.6% retracement). followed by an area of ​​interest that falls on the April 2020 low ($1,568).
• However, the gold price may continue to retrace the September range as it holds above the monthly low ($1,617), with a move above the $1,648 area (50% extension) and a return to the $1,670 (50% extension) radar.

— Posted by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong