Strong support at 1730 waiting for bears!
Look at the weekly chart of Gold. The current price sits almost at the 50% level of the entire 2020 range. It shows us the “make or break” point in the market.
After Friday's jump and dump and Monday's gain, Tuesday and Wednesday market was bearish. There are many reasons for that from both technical and fundamental points of view.
Last Friday's jump and dump, from the fundamental point of view, came after Reports from china about the COVID-19 outbreak that we talked about that last Friday. And from the technical side, the activation of buy stop orders sent the prices higher to touch the one-month high as well. Data shows that they were not new buys, just some coverings for short orders.
Currently at 1,790, Gold is trading 0.2% lower than the opening price. And if we look at the weekly chart once again, we can see that after the 2020 peak, it is mostly trading in a downtrend. For now, 20 and 100 weekly MA at 1,730 and 1,785 are the key levels. Trading between these levels has no direction, while for any up or down trend, we have to see the price well stable above or under its levels. As it is clear in the below figure, we have strong support at 50 weekly Ma at 1,730.
One of the reasons that buyers are not that active in the market is that the economy has been slowly recovering since the summer of 2020. And now, the high expectations of the Fed starting tapering in November and the possibility of the Fed’s first rate hike in the first half of 2022 are other reasons to believe that the sellers are still controlling the market.
So while we are getting closer to the November 2-3 meeting, it is clear that FED cannot continue its wait-and-see policy, and they have to make any decision next week, so we have the caution in the market, all across the board.
If the Federal Reserve goes hawkish or less dovish with a larger tapering strategy, we can see the Gold in lower levels. However, since this policy at the same time means less support from stock markets as well, then we can see in a bit longer term, will increase the gold demand as well. On the other hand, soft tapering can put the pressure on US Dollar and increase Gold prices.
