- Gold futures recovered from sharp losses last week as the XAU/USD gold price found momentum from weak US dollar and lower US Treasury yields.
- All in all, the precious metal has had a horrific year, which began when the Federal Reserve started raising US interest rates and shrinking its $8.9 trillion balance sheet.
- But with soaring inflation and weak data, can gold prices retest the $1,700 level?
The price of XAU/USD (gold) rose to the level of $1671 an ounce at the beginning of this week's trading, before returning to stability around the level of $1655 an ounce, at a time when it is looking for stimulus to exit the current descending channel. The XAU/USD (gold) price is back on a weekly loss of around 1%, adding to its year-to-date loss of around 9%. And for the price of silver, the sister commodity of gold, it's targeting the $19 level again. As silver futures rose to $18.79 an ounce. The price of the white metal fell more than 4% last week, adding to the bear market's losses.
In general, the metals market benefited from the rise in the global financial markets, which affected the US dollar and the bond market. Investors are still seeking a possible rate cut next week after a string of poor economic results in recent days.
The US inflation data was terrible for the yellow metal as it boosted a 75 basis point hike from the Federal Reserve next month. Not only that, with inflation looking so stubborn, it may need to go further than previously anticipated, Craig Erlam, chief market analyst at Oanda, said in a note. “This does not bode well for gold in the short term. Yesterday’s lows around $1,640 could soon be tested again, with late September lows tested after that.”
In addition, New York State's Empire State Index fell on Monday to -9.1 in October, worse than market expectations of -4. Later this week, industrial, manufacturing and housing production data will be released.
According to the factors affecting the gold market. The US Dollar Index (DXY), which measures the performance of the US currency against a basket of currencies, fell 0.66% to 112.56, from an opening at 113.22. In general, the index has risen by more than 17% since the beginning of 2022 to date. The strongest bearish price is for dollar-denominated commodities because it makes it more expensive for foreign investors to buy. Another factor affecting the market. US Treasury market yields were mostly in the red, with the benchmark 10-year yield dropping 8.8 basis points to 3.918%. The one-year bond slipped 2.2 basis points to 4.462%, while the 30-year bond yield fell 4.6 basis points to 3.929%. The appreciation rate environment is usually poor for non-yielding bullion because it increases the chance of holding these types of assets.
In other metals markets, copper futures rose to $3.445 a pound. Platinum futures rose to $917.60 an ounce. Palladium futures rose to $2,026.00 an ounce.
XAU/USD Forecast
According to the performance on the daily chart below, the XAU/USD (gold) price is still within a bearish channel range, and there will not be an initial breakout of the channel without stability above the resistance of $1700 an ounce. This may motivate the bulls for more buying deals and thus change the direction of the trend. According to the current bearish performance, the support levels 1648 and 1630 will be the most important for the bears, and at the same time from the last level and less than it, it is better to buy gold again.
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