- Sentiment stays nearly perfectly neutral
- As long as 1,180 is intact, the bias will be bearish
- Focus is on the rising support line
- Economic events on Wednesday: US Retail Sales (Sep), PPI (Sep)
Today the situation is different, and so far gold has dropped almost 1% on Tuesday, sliding from the highest level in three months on profit taking following a two-day rally triggered by expectations the US central bank will postpone an interest rate hike this year. The Fed is likely to refrain from raising federal funds rate until it is confident that global slowdown, China's cooling economy and other international threats will not derail the US economy.
Senior market analyst with Cambridge Global Payments, David Starkey, says that the expectations for inflation number this week are for "mildly deflationary reading". He adds that "the extremely negative non-farm payrolls eliminate the possibility of October rate hike" and that in fact there is almost no chance of a rate hike this year. David explains that "it is difficult to argue for tighter monetary policy when the labour sector is not performing and there is deflation in the economy".
US price level decline to accelerate
Holidays are over for the US bankers, and the activity should pick up over the next few days. Performance of gold early Tuesday serves as a good evidence that this week is not going to be calm. Our main focus, however, is on Thursday, which will be marked by the USA inflation, a release that is a potential game-changer.
Gold hesitates near August high
For the time being the precious metal is struggling to recover in the vicinity of the August high. Apart from the solid resistance here, we also have a dense supply area circa 1,180, which is a key to the May low and a multi-year down-trend at 1,230. Accordingly, as long as 1,180 is intact, the bias will remain bearish with a focus on the rising support line that connects lows of the last four months. Still, we should not forget the monthly R1 and 100-day SMA at 1,150 and 1,140 respectively that are highly unlikely to let the price fall sharply in case of a sell-off.Daily chart
As XAU/USD has bounced off the August high in the hourly chart, the next destination should be the 200-hour SMA at 1,141. If this proves to be insufficient to prevent a deeper decline, 1,113 is to become the new objective.
Hourly chart
Dukascopy clients remain net neutral
Sentiment in the SWFX market significantly differs from the distribution between the longs and short at OANDA and SAXO Bank. About 57% of traders of the Canadian-based broker are long the bullion, which is comparable with 60% of traders being bulls at SAXO Bank.