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Technical Analysis

GOLD Analysis – October 13, 2021

Pivot Point Breakout at 1,760

The precious metal gold is trading sideways in a limited trading range of 1,761 – 1755 on Wednesday. Gold closed at $1760.55 on Tuesday after hitting a top of $1769.90 and a low of $1750.55. As mounting inflation fears decreased risk appetite, the XAU/USD prices gained some support and climbed on Tuesday. Furthermore, increased demand for safe-haven gold provided some assistance. The strength of the U.S. dollar, however, curtailed the gains for the day.

On Tuesday, the return on the benchmark 10-year bond in the U.S. dropped to 1.56 percent. As a result, the yellow metal gained for the day. While the U.S. Dollar Index, which measures the dollar’s value against a basket of six major currencies, gained 94.56, the yellow metal’s gains were limited.

Gold prices are supported by risk-off sentiment above $1,760.

The market’s risk appetite waned after the economy was challenged by a worldwide energy shortage and rising inflation fears. As a result, more investors have turned to safer investments like gold.

Gold is typically thought of as an inflation hedge, but the expectation of less central bank stimulus and rising interest rates tends to push government bond yields higher. As a result, owning gold that yields no interest has increased opportunity costs.

Government bond yields tend to rise in anticipation of reduced central bank stimulus and interest rate hikes, resulting in higher opportunity costs for holding gold, which pays no interest.

On the data front, the NFIB Small Business Index for September stayed unchanged at 15:00 GMT, against estimates of 99.7. The JOLTS Job Openings dipped to 10.44 million in August, down from 10.95 million projected, dragging on the U.S. dollar and pushing gold higher at 19:00 GMT.

Raphael Bostic, President of the Atlanta Federal Reserve Bank, Delivers a Speech

Raphael Bostic, President of the Atlanta Federal Reserve Bank, stated on Tuesday that U.S. inflation was beyond the Federal Reserve’s target of 2%. Policymakers must be cautious to avoid causing long-term forecasts to become unanchored as a result of pandemic-induced pressures.

He believed that pandemic-related pricing patterns would eventually reverse. He was concerned, though, that some supply chain disruptions would linger longer than projected. According to him, the Fed’s staff may stop referring to inflationary pressures as temporary because they are likely to persist beyond the Federal Reserve’s 2 percent target.

As per Fed Vice Chair Richard Clarida, the price stability mandate’s considerable further progress threshold has been more than met. The employer mandate, on the other hand, has not yet been completed. He believes the Fed should start slowing down its bond purchases shortly. Clarida also mentioned that the Fed’s tapering programme could be completed by the end of 2022.

GOLD Intraday Technical Level

Support Resistance
1750.76 1770.11
1740.98 1779.68
1731.41 1789.46
Pivot Point: 1760.33

GOLD – Technical Outlook

On Wednesday trading sessions, gold was trading with a slight bullish bias at the 1760 level. It has already violated an intraday pivot point level of 1760, indicating bullish sentiment in the market.

On the upside, gold is anticipated to encounter immediate resistance around 1765, while a break above 1765 might push gold prices to the following resistance levels of 1770. Gold is now holding at 1760 and it may find immediate support at 1759, which is being extended by a triple top pattern. This triple top pattern was violated during the Asian session, and now it’s working as a support for the gold.

Below this pivot point, the 50-day SMA (simple moving average) provides immediate support at 1755. Gold’s bullish bias remains strong above 1,760 and vice versa.
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