GOLD Analysis – September 29, 2021

Fed Chair Powell Speech in Highlights

During Wednesday's Asian trading session, the yellow metal price is trying to make a little recovery attempt from seven-week troughs of $1728, as bulls once again aim for a retest of the $1750 barrier. Gold extended its intraday declines through the Asian session and remained depressed near seven-week lows, below the $1,740 level in the last hour. Increases in U.S. Treasury bond yields, fuelled by expectations of an early Fed policy tightening, proved to be one of the primary factors pushing the non-yielding yellow metal down.

A US dollar near ten-month highs also put pressure on the safe-haven asset, with expectations of an earlier-than-expected interest rate hike. The U.S. dollar was the highest in 10 months while the market's priced in the hopes of the Federal Reserve reducing asset purchases in November and an interest rate hike. As a result, 10-year Treasury yields reached a three-month high, reaching a high of 1.5530% in recent trade. Apart from this, the long-lasting uncertainty surrounding the U.S. stimulus and debt ceiling extension seems to give some support to the gold price to limit its deeper losses.

Moreover, the emerging coupon payment of the Evergrande bonds and the U.S. push for China to cut oil imports from Iran put some burden on the market's trading sentiment, which acted as a tailwind for traditional safe-haven assets and helped limit any further losses for the XAU/USD, at least for now. As of writing, the precious metal price is trading at 1,739.40 and consolidating in the range between 1,733.43 and 1,741.40.

Despite the uncertainties over Evergrande coupon payment & mixed U.S. debt limit/stimulus talks, the market's trading sentiment succeeded in stopping its previous day's losses and drew some strong bids on the day. This was evidenced by new gains in Sample 500 futures. It is reported to have gained 0.45%, snapping a two-day decline, whereas U.S. 10-year Treasury yields are on the rise for the fifth consecutive day, trading near 1.55% at the time of writing. However, the market's trading sentiment was supported by the positive remarks from Australia's Treasurer, Josh Frydenberg, who ordered firmer vaccinations to stop emergency aid payments.

Since June, the federal government has spent about A$9 billion ($6.5 billion) to support around 2 million people but will phase out the payments as vaccination levels near targeted levels at 70%-80%. Apart from this, U.S. President Joe Biden cancelled a visit to Chicago to lead discussions over his congressional agenda. The Democratic Leader is set to negotiate a deal with Republicans after the GOP refused the bill to extend the debt ceiling and U.S. Treasury Secretary Janet Yellen warned of empty pockets by October 18.

Elsewhere, China's rejection of Intellectual Property (I.P.) for covid vaccine also played a significant role in underpinning the market trading sentiment. However, the prevalent buying bias surrounding the market's trading sentiment was a critical factor that kept gold prices under pressure.

Despite the upbeat market sentiment, the broad-based U.S. dollar succeeded in extending its previous-day upward rally and remained trading near its highest levels of the year on Wednesday after driving higher with U.S. yields. U.S. Treasury yields have climbed recently, with benchmark 10-year rates up 25 basis points in five sessions to 1.5548% as Fed tapering looms before the year's end and as inflation starts to look stickier than first thought. Thus, the bullish sentiment surrounding the U.S. dollar was understood as a significant factor that helps the gold price limit its deeper losses as the price of gold is inversely related to the price of the U.S. dollar.

In the absence of Asian data or events, Fedspeak and second-tier US housing data will be critical to monitor. Meanwhile, the headlines concerning stimulus, debt limits, and China will also be the key to following a new direction.

GOLD Intraday Technical Level

Support Resistance

1743.61 1759.76

1736.08 1768.38

1727.46 1775.91

Pivot Point: 1752.23

GOLD - Technical Outlook

At the 1,738 level, gold is trading with a negative bias, with immediate resistance at 1,739. At 1739.23, an intraday pivot point level is offering immediate resistance. The precious metal is consolidating underneath the pivot point level on the 4-hourly period, as investors wait for Fed Chair Powell to speak.

In addition, the 50-day SMA (simple moving average) around 1,750 indicates a gold selling trend. Furthermore, the closure of candles underneath the 1,738 level implies the continuation of the negative trend. This barrier is also being extended by a descending triangle breakout.

Gold's immediate support levels are 1,723 and 1,712, respectively, on the downside. Simultaneously time, the following level of resistance is located between 1,739 and 1,749 pips. Consider selling below 1,739 and buying above 1,739 as an example.