The Gold price has stabilised over the last few days, but robust overhead resistance should soon have XAU/USD back on a downward slope. After losing 5% in September, spot Gold (XAUUSD) looked sure to start October firmly on the back foot. However, Bond yield and the US dollar have taken a break, and the price has strung together three straight days of gains, improving by $50 in the process. Despite this, the stage is set for the Gold price to head lower.
Mounting fears over the Chinese property market, a hawkish Fed, and the looming debt-ceiling ceiling crisis weigh heavily on risk assets. US stock gauges have priced sharply lower in the last few weeks, resulting in the 10-year yield spiking to 1.50% and the greenback finding a safe-haven bid. Subsequently, the Gold price slipped to a six week low of $1721.70 last week. However, yesterday XAU/USD finished the day at $1,770, encouraging a slew of bullish price forecasts. Nonetheless, the path of least resistance is still lower.
XAUUSD Pricve Analysis
The daily chart shows the Gold price has been trending lower for the last year. Subsequently, it is below the 50, 100 and 200-day moving averages and in a downward sloping parallel channel. Towards the end of September, the Relative Strength Index dropped to 33.0, suggesting the price was overdone on the downside. Furthermore, it coincided with the US Dollar Index testing trend resistance. Subsequently, both †he Dollar and Gold were ripe for a short-term reversal. However, the underlying risk factors remain, and after a brief pullback, the US Dollar should continue higher.
The recent bounce in Gold has lifted the price towards the significant moving averages. The 50-day at $1783, the 200-day at $1,801 and the 1900-day at $1,807.50 provide considerable resistance above the market. Therefore, I expect sellers to emerge scale-up between here and $1,800, capping the price and reversing its trajectory. Ultimately, the longer-term downtrend should remain the dominant theme. On that basis, the Gold price should continue lower towards the triple-bottom low at $1,676. This bearish thesis remains valid as long as the price remains below the DMA’s. Therefore, a close above $1,807.50 invalidates the pessimistic view.
US Dollar Index (1-Week)
Gold Price Chart (Daily)
For more market insights, follow Elliott on Twitter.