Technical Analysis

GOLD Analysis – October 18, 2021

By LonghornFX Technical Analysis
Oct 18, 20214 min

Gold Slips Below 1,776 Pivot Point

The gold price managed to halt its previous week's downward trend and received some small bids near the $1,770 level. The erratic performance of stock markets, on the other hand, was viewed as a critical factor supporting the safe-haven XAU/USD. According to figures released earlier this Monday, China's economic growth slowed substantially in the third quarter of 2021. This, combined with concerns about inflation rising faster than predicted, fueled fears of stagflation and depressed market confidence. This put negative pressure on market trade sentiment and boosted safe-haven commodities like gold.

Gold prices fell on Friday as evidence emerged that the US economy may not be contracting at a rate that would result in stagflation in 2022. The US Retail Sales report at the end of the week was startlingly good, which, along with the day's lingering bulls on Wall Street, led the day's remaining bulls to cash in and stepped away. XAU/USD fell from a high of $1,796.49 to a low of $1,764.86 on Friday. The gold price is 0.14 percent higher at the start of the week as buyers seek to protect a critical level of support, as shown below, and is trading near $1,770.So far, the high for the day is $1,772, and the low is $1,764.

The yellow metal's positive tendency, on the other hand, has been constrained by broad-based US dollar strength, which the current cautious tone has assisted in the equity markets. Furthermore, the US dollar's upward trend was stifled by a quick rise in US Treasury bond yields, discouraging bulls from making aggressive bets and restraining additional gains for non-yielding gold.

Gold is trading at 1,767.99 and is stabilizing in the band of 1,765.00-1,772.12. Despite a considerable follow-through positive gain in US Treasury bond yields, market trade sentiment failed to continue its strong positive performance from earlier in the day and lost some positive momentum at the start of the week. However, the cause could be attributed to China's macroeconomic announcements being weaker than anticipated. This, combined with concerns about inflation rising faster than predicted, fueled fears of stagflation and depressed market confidence. As a result, the continuous mixed performance of the equities markets was viewed as a crucial reason that provided some support to the safe-haven XAU/USD.

In terms of data, China's National Bureau of Statistics reported on Monday that economic growth in the world's second-largest economy fell to 0.2 percent and 4.9 percent year on year in the third quarter, down from 1.3 percent and 7.9 percent in the previous quarter. Furthermore, China's Industrial Production fell short of market expectations in September, expanding by 3.1 percent year on year, compared to 5.3 percent in August. This substantially overshadowed September's better-than-expected monthly Retail Sales figures, which grew by 4.4 percent. This comes amid concerns that inflation may rise faster than expected, exacerbating fears of stagflation.

The broad US dollar maintained its earlier positive trend and remained strongly bid, supported by increased Treasury yields. Meanwhile, the current cautious tone in financial markets was considered another major factor contributing to gold prices gaining additional support. The US Dollar Index, which compares the US dollar to a basket of foreign currencies, was 0.18 percent higher at 94.105. As a result, the precious metal's rising potential was restrained by the favourable trend of the US dollar.

The markets may remain quiet in the absence of major key data, although Federal Reserve speakers and the Fed's Beige Book may keep traders interested. Meanwhile, keep a lookout for the monthly release of US Industrial Production.

GOLD Intraday Technical Level

Support Resistance

1756.81 1787.01

1744.08 1807.48

1724.61 1819.21

Pivot Point: 1776.28

GOLD - Technical Outlook

Gold continues to trade bearish and is now priced at $1,765 per ounce. The technical side of gold is suggesting strong bearish bias. The RSI has dropped below 50 and it’s suggesting a selling trend in gold on a 4-hour timeframe.

The 1,756 level, on the other hand, is gold's immediate support. If the 1,756 level is broken, a sell-off might ensue till the 1,744 and 1,736 levels are reached. On the upside, gold's following resistance levels remain at 1,776 and 1,787, respectively.

We might anticipate a bearish correction in bullion on Monday, particularly below the 1,776 mark. Gold bearish bais dominates below 1,765 and vice versa. All the best!


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