Market Overview

This week has started out unexpectedly dramatic for gold prices as they plunged by 3.1% to $1795 per troy ounce from $1850. This was strongly correlated with the rise of the U.S. Dollar amid expectations of faster tapering of the bond purchases program from the Federal Reserve (Fed) after Jerome Powell was reappointed for a second term by U.S. President Joe Biden.

Mr. Powell, who was appointed as the Fed’s watchdog by Donald Trump, is set to hold this position until  January as   his renomination for the second term seemed not to be certain. Now investors seem to be saluting the continuation of Fed’s monetary policy with the rising Greenback.

However, the alternatives to the U.S. Dollar are suffering with gold prices tumbling to $1780 per ounce. Gold prices may not be expected to fall much further from the important $1800 level as the Dollar rally itself is stuck at the moment. The U.S. Dollar index soared to 96.6 points on Monday but now it is trading in a narrow range close to 96.5 points.

Investors are waiting for the new drivers for the Dollar to distinguish its further dynamics. And these drivers are to appear on Wednesday as the Core PCE index and Q3 GDP in the United States will be published along with the Federal Open Market Committee (FOMC) Minutes. The heart-breaking record inflation levels are the primary reasons for gold prices to rally. The U.S Gross Domestic Product (GDP) is expected to be up by 2.2 quarter-on quarter in Q3 2021 beating the Q2 when it was up by 2.0%. If these figures are confirmed, the possibility of faster monetary tightening from the Fed could be elevated, and that is a negative factor for gold prices. Investors are expected to examine FOMC Minutes to distinguish nuances of future monetary policy and perspectives of faster tapering.

Nonetheless, the upward trend for gold prices is still intact. Thus, after a sharp correction at the beginning of this week an upside rebound may be expected. It is unlikely that gold price may dive to below a strong support level at $1785 per ounce. The strength of this support is also confirmed by the 50% Fibonacci retracement level and an uptrend support line. So, an upside movement to $1830-1845 per ounce may be expected.

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