The Golden Potential

Gold prices got stabilized by the middle of September. Now is when this precious metal is not used by investors as a shield protecting from market risks. This fact helps the prices to “get into the equilibrium”. By the end of the second decade of the month, the troy ounce of Gold costs $1321, which is right in the middle of the mid-term trading range. Political calmness allows Gold to fall a bit deeper, towards $1310-$1315, but the metal is very unlikely to go any lower.

It’s interesting that the decline of the interest to Gold as a “safe haven asset” tallied with the time when another geopolitical tension arose. Several days before that, North Korea flight-tested ballistic missiles, which crashed into the sea far from the Japanese coast. However, such pieces of news no longer surprised anybody. The world’s leaders are in fierce debates what side to choose when it comes to their attitude to the North Korean situation and demonstrative aggression from this country. So far, they haven’t come to a consensus. In that case, the demand for “safe haven assets” decreased for a while.

The short-term weakness of the US Dollar may yet provide support to Gold. This week, the US Federal Reserve is going to have another meeting and investors expect the regulator to make some decisions relating to its monetary policy and the key rate. However, the market is interested in something else. According to the latest CME future, investors’ expectations about the Fed rate increase in December were 56%. It’s more than the week before, but still not enough to make any conclusions.

At first, expectations were as follows: since the inflation is the USA came close to the Fed’s target of 2%, then the regulator had an excellent opportunity to increase the rate. But the statistical reports on retail sales and industrial production that followed really disappointed. The numbers were so mixed that the key rate increase might do much harm to the country’s economy, which was growing irregularly.

Also, one shouldn’t ignore the consequences of the hurricanes that “torture” the USA and may require a lot of money from the budget to rebuild towns, cities, and seaside. In this light, it’s important to read the regulator’s comments after the meeting. it is quite possible that the minutes will contain some specific opinions about this.

So, the market is not ready to include geopolitical risks into the Gold prices. However, if the US Dollar gets weaker again this week, the troy ounce cost may go higher.

From the point of view of the technical analysis, Gold is moving inside the mid-term ascending channel. But at the same time, one should note that right now the price is getting closer to the downside border of the channel with the key level at 1310. At the moment, this area is a support level, where traders and investors may try to open long positions. If the “bulls” are active and their demand is high, the instrument may grow towards the upside border at 1350. This is a short-term outlook.

In order to rebound from the current support level at 1310, the market has to confirm this scenario by breaking the upside border of the short-term descending channel and fix below 1325. The target specified earlier, 1350, maybe a mid-term resistance area. If the price breaks it, the uptrend may continue towards 1400.

Gold 4H Chart
Gold 4H Chart

But breaking the current support level at 1310 may allow the instrument to move to the downside. The target of this decline may the at 1275. This level is the border of the support area and a mid-term put-up demand. Testing this area may define future mid-term trends.

RoboForex is a group of companies that offers brokerage services to clients in various countries over the world. The group provides traders from the Forex and stock markets with access to its proprietary trading platforms. 

Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex bears no responsibility for trading results based on trading recommendations described in these analytical reviews.