GOLD Analysis – September 30, 2021

US GDP Figures Ahead

During Thursday's Asian trading session, the yellow metal price managed to stop its overnight bearish moves and drew some modest bids around above the $1,730 level. After a sharp rise since the end of last week, U.S. Treasury bond yields witnessed a modest pullback on the day. The benchmark 10-year U.S. government bond yield dropped by 3.0 basis points (bps) to 1.51%. This, in turn, turned out to be one of the key factors that extended some support to the non-yielding yellow metal. Meanwhile, the U.S. Dollar Index (DXY) eased from a yearly high of around 94.30, snapping a four-day uptrend, which also helped gold prices remain bid, as gold prices are inversely related to the price of the U.S. dollar.

Apart from this, the escalating energy crisis in China reinforced the fears of a slowdown in the world's 2nd-largest economy, which also benefitted the safe-haven gold prices. Meanwhile, concerns over the U.S. debt ceiling remained supportive of the strong bid tone surrounding gold prices. In contrast, the upbeat market sentiment, represented by a solid recovery in the equity markets, was seen as one of the key factors that capped further gains in the yellow metal prices. As of writing, the precious metal price is trading at 1,732.37 and consolidating in the range between 1,726.25 and 1,733.03.

Despite China's 1st-factory activity contraction since February 2020 and a 2nd-coupon payment default by Evergrande, not to mention the intensifying energy crisis in China, the market's trading sentiment succeeded in extending its previous-day upward rally and remained well bid on the day. The S&P 500 Futures climbed by 0.30% intraday to keep Wednesday's rebound from a weekly low. However, the positive news of AstraZeneca's covid vaccine showing 74% efficacy in the large U.S. trial has underpinned the latest hopes of overcoming the Delta covid crisis, which was seen as one of the key factors that put some bullish impact on the market trading sentiment.

In the meantime, U.S. House Speaker Nancy Pelosi seems hopeful of a solution, and President Joe Biden also turned down his official travel plans to solve the critical issue. This kept investors hopeful ahead of the decision day and played a significant role in underpinning the marker's trading sentiment. Thus, the risk-on market mood, represented by a solid rebound in the equity markets, was seen as one of the key factors that kept the lid on any additional gains in gold prices.

Following a strong hike since the end of last week, U.S. Treasury bond yields faced a modest pullback on the day. The benchmark 10-year U.S. government bond yield dropped by 3.0 basis points (bps) to 1.51% as traders shifted their focus from the Fed's tapering concerns to the U.S. stimulus and debt ceiling headlines. This, in turn, was seen as one of the key factors that gave some support to the precious metal.

At the USD front, the broad-based U.S. dollar failed to extend its bullish overnight rally and dropped quietly on the day as the market risk-on mood tends to undermine the safe-haven U.S. dollar. Meanwhile, the declines were further bolstered as Treasury yields fell by 3.0 basis points (bps) to 1.51%. The U.S. dollar was consolidating near a one-year high against major peers on Thursday, following a two-day surge amid hopes for a tapering of Federal Reserve stimulus in November and a possible interest rate hike in late 2022.

The dollar index, which measures the currency against a bucket of six rivals, stood at 94.336, little changed from the previous day's when it hit 94.435 for the 1st-time since late September of last year. However, the decline in the U.S. dollar could be short-lived as the downbeat headlines concerning China and Evergrande support the greenback. This, along with expectations for an early Fed policy tightening, helps the dollar limit its losses. Consequently, the bearish sentiment surrounding the U.S. dollar was seen as a significant factor that kept the gold price higher as the price of gold is inversely related to the price of the U.S. dollar.

Alternatively, the mounting energy crisis in China bolstered the fears of a slowdown in the world's 2nd-largest economy, which helps the yellow-metal stay bid. Meanwhile, China's 1st-factory activity contraction since February 2020 and a second coupon payment default by Evergrande seem to challenge the market's upbeat mood and contribute to the gold gains. In addition to this, the jump in Aussie virus infections, as well as mixed sentiment over the U.S. stimulus and debt ceiling issues ahead of the October 01 budget expiry, will challenge the market mood.

Looking forward, global market traders will keep their eyes on China's official and Caixin PMI data to measure the nation's economic performance during challenging times. In the meantime, the headlines concerning the final reading of the Q2 US GDP and Weekly Jobless Claims will also be key to watch.

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

Around the 1,733 level, gold is trading with a negative bias, with immediate resistance at 1,739. At 1731.98, an intraday pivot point level is offering direct support. The precious metal is consolidating above the pivot point level on the 4-hourly period as investors wait for the final GDP figures from the United States before taking any important positions.

Furthermore, the gold 50-day SMA (simple moving average) of 1,732 indicates a selling trend. Moreover, the closure of candles below the 1,732 level implies the continuation of the negative trend. The precious metal has established a descending channel on the 4 hours, indicating a selling trend in gold.

Gold's immediate support levels are 1,725 and 1,718 on the downside. At the same time, the next level of resistance is located between 1,742 and 1,756. Consider selling below 1,732 and buying above 1,732. Best of luck!