Gold Price Breaks Lower On USD Strength and Weak Equities

Gold price feels some heat as we get closer to Election Day in the United States. The stock market in the US dropped, triggering a higher USD across the board. Inevitably, a higher USD translates in a lower gold price.

With little or no important economic events this week, the price of gold reacts to the USD moves and technical trends. The break below $1,900 marks the end of a contracting triangle and a rejection from dynamic resistance.

What next? How about a move back to $1,700?

The USD Weighing on the Price of Gold

After the gold price reached $2,000, many voices hurried to call a move to $3,000 and beyond as imminent. The demise of the USD was one of the main causes of such predictions.

Yes, gold did keep its value against fiat currencies, but that happened in time. Despite the general weak trend for the USD after the pandemic reached the Western world, the USD remains the dominant fiat currency. In fact, its role in the international arena strengthened, as shown by the USD denominated debt issued by countries other than the United States.

As such, strong demand for USD will likely trigger a risk-off move, as shown by the equities. If that is the case, the gold price has more room to fall from the current $1,900 level.

Gold Price Technical Analysis

The price of gold has reached dynamic resistance and was not able to surpass it. Moreover, it formed a triangle as a reversal pattern, and that triangle just broke lower.

Next, the path of least resistance points to a move to the apex of a previous triangular pattern. A clear break there opens the gates for the measured move of the triangle that formed at the $2,000 level.

Therefore, bears may want to remain short on gold price with a stop loss at $1,966 and a take profit at the round $1,723, as pointed by the triangle’s measured move. 

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Gold Price Forecast

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