Market news

21 November 2021

Gold Price Forecast: Bears in control for the open

  • Gold is on the back foot on the approach to prior resistance. 
  • XAU/USD could stage a deep correction if $1,850 becomes resistance
  • US dollar on form as European covid risks rear their ugly head again.  

The price of gold is lower despite the risk-off mood. XAU/USD ended on Friday down some 0.70% falling from a high of $1,865.83 to a low of $1,843.09. The greenback was favoured instead after Austria said it would be the first country in Western Europe to reimpose a full lockdown while Germany said it could follow suit, sending the euro lower and lifting the US dollar.

The dollar index, which tracks the greenback against a basket of six major currencies, was up 0.57% at 96.066 by the close, a touch lower than an its16-month high of 96.266 printed mid-week. For the week, the dollar was up around 1% DXY. It has the edge as the market's expectations have grown that interest rates will be hiked faster in the United States.

For instance, Federal Reserve Governor Christopher Waller said the Federal Reserve should speed up the pace of tapering its bond purchases to give more leeway to raise interest rates from their near-zero level sooner than it currently expects if high inflation and the strength of job gains persist. Additionally, Fed Vice Chair Richard Clarida said it "may very well be appropriate" to discuss speeding up the Fed's asset purchase wind-down when it next meets, on Dec. 14-15. 

Meanwhile, the CTA buying program in gold has run out of steam, leaving the yellow metal vulnerable to a deeper consolidation if prices fail to hold above the $1,840/oz region, analysts at TD Securities argued.

''After all, while the yellow metal remains an ideal hedge against rising stagflationary winds, the tug-of-war between high inflation prints and market pricing for central bank hikes hasn't definitively concluded.' TD Securities forecast slowing growth and inflation next year, noting that the market's pricing for Fed hikes remains far too hawkish. 

Gold technical analysis

 The bias is to the downside at the moment taking into account the weekly, daily and lower time frames:

Gold, Chart of the Week: Bears eye the 38.2% Fibo for the open

From a four-hour perspective, the price is meeting short term support. However, the price action is strongly bearish and a continuation to the downside would be expected at this juncture. 

Market Focus

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

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