Gold prices fell after the US Federal Reserve (FED) meeting in September as the FOMC signaled additional rate hikes in the coming months. Technical analysis studies show that gold prices, which fail to provide a meaningful recovery above 1680, may weaken further. Meanwhile, Credit Suisse analysts convey their expectations…
Gold failed to recover after FED meeting
cryptocoin.com As we reported, the Fed meeting in September revealed a more hawkish FOMC than the markets expected. Prior to the meeting, interest markets had expected the Fed funds rate to peak at 4.5 percent in 2023. It was estimated to close the year close to 4 percent. The net effect has been US Treasury yields, which have lowered gold prices over the past few months. The US 10-year real return peaked at +110.
Gold continued to trade lower on Friday as the dollar remained close to a 20-year high. In addition, the attractiveness of gold was weighed on as a result of the FED’s hawkish monetary policy towards aggressive interest rate hikes. High interest rates in the economy tend to reduce the attractiveness of the non-interest bearing yellow metal. The dollar index was around its highest level since 2002. As we mentioned above, the 10-year US bond yield was affected by the Fed’s 75 basis point rate hike. It also rose to an 11-year high, bolstered by Wednesday’s hawkish appearance.
Credit Suisse strategists expect further declines in gold
Meanwhile, gold confirmed a major double peak. Strategists at Credit Suisse expect the yellow metal to weaken further. We need to see a break above the 55-day moving average at $1,734 to ease the downside pressure. Strategists explained that the yellow metal below $1,691-1,676 will reduce risks over the next 1-3 months. Experts at the bank used the following statements:
Gold below $1,691/76 has confirmed a major ‘double top’ that has reduced risks for at least the next 1-3 months. XAU/USD is also now hovering clearly below both the 55-day and 200-day averages. It is currently seen at $1,734/1.831 dollars. We note that the next support is seen at $1,618/16, then $1,560 and finally $1,451/40.
We also need to see a break above the 55-day average of $1,734 for a bullish sentiment. Currently, gold is changing hands about $90 below this level. Analysts use the following statements:
Only a convincing break above the 55-DMA at $1,734 could ease the pressure on the precious metal. The next resistance will be seen at the even more important 200-DMA, currently at $1,831.
