Gold plummeted, what is the future trend?
The US CPI exceeded expectations, and gold tumbled
After hitting multi-month lows last week, gold prices (XAU/USD) have seen a modest recovery in recent days. Gold briefly rose to its highest level since September at the 1885 line on Thursday morning. However, better-than-expected US inflation data interrupted gold's upward momentum. Data showed that the US consumer price index (CPI) in September increased by 0.4% month-on-month and 3.7% year-on-year, both 0.1 percentage points higher than expected.
Related reading: The overall CPI of the United States in September was higher than expected, the dollar rose, and gold fell in the short term!
Sticky inflationary pressures rekindled upward momentum in U.S. Treasury yields, which also paved the way for broad dollar strength. The better-than-expected CPI data also led traders to reprice the Fed's terminal interest rate, increasing bets on a 25 basis point rate hike by the US Federal Open Market Committee (FOMC) in December (from 26% to 36% before the day). Naturally, these fundamental developments had a negative impact on gold and silver, both of which gave up their earlier gains and turned lower.
While the prevailing market environment remains challenging for precious metals, the horizon seems to be slowly starting to glimmer of hope. For example, Fed officials have recently advocated patience and hinted that the Fed will be cautious about its follow-up actions, suggesting that policymakers are on the verge of ending the rate hike cycle. As the tightening cycle draws to a close, both the upside of nominal and real interest rates will be limited going forward, creating a more favourable environment for non-yielding assets.
Technical analysis of gold trends: fall back in case of resistance, pay close attention to subsequent developments
Gold briefly rose to the 1885 line of technical resistance on Thursday morning, but was quickly rejected, suggesting that market bears continue to take control. In other words, traders should continue to monitor the development of price action over the next few days for insight into potential signs of continued weakness. If weakness continues, this could push gold prices lower towards the 1860 line. While gold is expected to find support at the 1860 line, a break below could leave the possibility for gold prices to retest their 2023 lows.
Conversely, if gold bulls return to the market and trigger a strong rally in gold prices, initial resistance focuses on the 1885-1890 line. Gold bears may be fighting here, but once bulls effectively break this resistance, then gold prices are expected to rise further towards the 1905 line (the 38.2% Fibo retracement level of the May/October decline). If it continues to rise, then gold bulls are expected to attack the resistance of the channel, which is currently at the 1925 line.
(Source: Dailyfx-Lisa Yin)