Gold Price Forecast: XAU/USD bulls seeking a move to key daily resistance
- Gold bulls could be on the verge of a move higher to test daily resistance.
- The US dollar, however, is also at a critical level of support.
Gold is under pressure on Monday as it pulls back from the highs reached at the start of the day around $1,670, 0.5% higher than the current spot price of $1,650. The US dollar has firmed for its safe haven qualities but is teetering with key trendline support that is illustrated below, a break of which could help to boost the yellow metal.
The US dollar index, DXY, was last seen up 0.10 points to 111.98, making gold more expensive for international buyers. The yield on the US 10-year note was last seen down 0.3 basis points to 4.234%, near the 14-year high of 4.325% reached at the end of last week which is pushing up the carrying cost of owning gold.
''We've seen this movie before,'' analysts at TD Securities said. ''The 'peak central bank hawkishness' narrative once again orchestrated an attempted squeeze on bloated money manager shorts in precious metals, but failed to gather steam.''
'''After all,'' the analyst say, ''while rates markets are increasingly pricing in a fair outlook for the Fed funds rate, precious metals have yet to discount the implications of a prolonged period of restrictive rates. In reality, the resiliency in gold prices while facing the most hawkish central bank regime since the 1980s highlights a growing battle between retail and institutional flows.''
''Massive purchases of physical precious metals from retail buyers have clashed with institutional investor outflows in past months.''
US data softer, bad news is good news?
Meanwhile, the preliminary October US PMI data were disappointing today, with the numbers indicating that both the manufacturing (49.9 vs 52.0) and service sectors (46.6 vs 49.3) are now in a contractionary territory (50 being par). This leaves prospects of a less hawkish Fed back o the table, so bad news is good news for the gold price. In full, the data showed that 47.3, the composite PMI registered its fourth consecutive print below 50.0. The drop in the composite measure was led by a 4.1% drop in the backlog of orders to 46.6, a 2.2% drop in new orders to 49.0 and a 2.5% drop in employment to 49.8. Output prices fell 0.8 to 58.3. This leaves a dark cloud over US exports and signals that the strength of the US dollar could be impacting negatively.
The next big piece of the puzzle for the US economy will come in the form of Gross Domestic Product. ''We look for US output to have rebounded firmly after registering two consecutive quarterly declines in 22H1. We expect Q3 GDP growth to be supported, in particular, by a large, positive swing in net exports. Domestic demand, however, likely advanced at a below-trend pace,'' analysts at TD Securities said.
Gold technical analysis
From the daily, above, and hourly, below, we can see that the price is bounded by last week's range and below a key dynamic resistance. However, the path of least resistance could well be to the upside as the bulls move in at hourly and daily supports. The break of the micro trendline could be a key feature for the days ahead and lead to a break towards the longer-term trendline in a move derived from the neckline of the W-formation:
The US dollar, meanwhile, is up against a key area of support within the bullish flag on a daily time frame. The rising support could see the greenback bust back to life and hinder the prospects of a stronger correction in the gold price.
