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Gold Price Defends September Range as RSI Holds Above Oversold Zone

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Gold Price Forecast Continues to Be Bearish


Gold Price Talking Points

The price of gold trades to a fresh weekly high ($1688) even as the Federal Reserve delivers another 75bp rate hike, and bullion may continue to defend the September range as the Relative Strength Index (RSI) appears to be reversing ahead of oversold territory.

Gold Price Defends September Range as RSI Holds Above Oversold Zone

The price of gold bounces back from the monthly low ($1654) as US Treasury yields pull back from fresh yearly highs, and the precious metal may stage another attempt to test the 50-Day SMA ($1732) as the RSI holds above 30.

As a result, the price of gold may continue to retrace the decline from the monthly high ($1735), but bullion may fall back towards the yearly low ($1654) as it seems to be tracking the negative slope in the moving average.

Keep in mind, the price of gold cleared the May 2020 low ($1670) following the failed attempts to push above the moving average, and the precious metal may face headwinds over the remainder of the year as the Federal Open Market Committee (FOMC) projects a steeper path for US interest rates.

Source: FOMC

The upward adjustment in the interest rate dot-plot suggests the FOMC will retain its current approach in combating inflation as the central bank insists that “ongoing increases in the target range for the federal funds rate will be appropriate,” and the committee may continue to strike a hawkish forward guidance for monetary policy as “restoring price stability will likely require maintaining a restrictive policy stance for some time.”

In turn, expectations for higher US interest rates may further dampen the appeal of gold as the FOMC argues against “prematurely loosening policy,” and it remains to be seen if the Fed will deliver another 75bp rate hike at the next interest rate decision on November 2 as Chairman Jerome Powell and Co. pledge to “keep at it until we are confident the job is done.”

Until then, developments coming out of the US may influence the price of gold as FOMC pursues a restrictive policy, and bullion may largely reflect an inverse relationship with Treasury yields as the committee shows little interest in scaling back its hiking-cycle.

With that said, the price of gold may continue to defend the September range as the RSI holds above oversold territory, but bullion may continue to threaten the monthly low ($1654) as it appears to be tracking the negative slope in the moving average.

Gold Price Daily Chart

Source: Trading View

  • The price of gold cleared the May 2020 low ($1670) after failing to test the 50-Day SMA ($1732), and bullion may continue to threaten the yearly low ($1654) as it appears to be tracking the negative slope in the moving average.
  • Failure to defend the September range may push the price of gold towards $1748 (50% expansion), with the next area of interest coming in around $1601 (38.2% expansion) to $1618 (50% retracement).
  • A break/close below the $1584 (78.6% retracement) region opens up the April 2020 low ($1568), but the price of gold may continue to defend the September range as the Relative Strength Index (RSI) appears to be reversing ahead of oversold territory.
  • Need a break/close above the $1690 (61.8% retracement) to $1695 (61.8% expansion) region to bring the $1726 (38.2% retracement) region on the radar, with a move above the 50-Day SMA ($1732) raising the scope for a test of the monthly high ($1735).

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— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong





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