Gold edged higher for the second consecutive session on Wednesday, albeit lacked follow-through and remained below the overnight swing highs. Currently trading just above the $1,760 level, a modest US dollar weakness was seen as a key factor that extended some support to the dollar-denominated commodity. Apart from this, the prevalent cautious market mood – amid concerns about the return of stagflation – further acted as a tailwind for the safe-haven precious metal. Investors remain worried that the recent widespread rally in commodity prices will stoke inflation and derail the global economic recovery.
Meanwhile, a slight USD pullback lacked any obvious fundamental catalyst and seems cushioned amid expectations that the Fed will begin tapering its bond purchases in November. The markets have also started pricing in the possibility of a Fed rate hike in 2022 to counter the risk of inflation becoming too high. This was evident from elevated US Treasury bond yields, which should help limit any meaningful USD downside and hold traders from placing aggressive bullish bets around the non-yielding gold. Investors now await the release of US consumer inflation figures to gauge the Fed's path on normalizing monetary policy.
This will be followed by the FOMC monetary policy meeting minutes, later during the US session. A stronger CPI print and (or) a more hawkish Fed could bring additional gains for the US currency and provide a fresh directional impetus to gold prices. In the meantime, the broader market risk sentiment, along with the US bond yields will be looked upon for some short-term trading opportunities around the commodity.
From current levels, the overnight swing highs, around the $1,769-70 region, might continue to act as immediate strong resistance. Some follow-through buying has the potential to lift gold back closer to the $1,783-84 horizontal barrier. A sustained strength beyond should allow bulls to aim back to reclaim the $1,800 round-figure mark.
On the flip side, the $1,750 area has emerged as immediate strong support. A convincing break below might prompt aggressive technical selling and accelerate the slide towards September monthly swing lows, around the $1,722-21 region. Gold could eventually drop to test the $1,700 mark en-route August monthly swing lows, around the $1,687 region.
Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72.72% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.
© 2011-2021 Teletrade-DJ International Consulting Ltd
Teletrade-DJ International Consulting Ltd is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11.
The company operates in accordance with the Markets in Financial Instruments Directive (MiFID).
The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. Teletrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.
TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.
Teletrade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.