Gold price continues to plummet for the 7th consecutive day as markets react to the hawkish stance maintained by the Fed. On Tuesday, the markets are also likely to face some volatility as US job openings data is set to be released.
Despite lower-than-expected PCE inflation data, the dollar surged once again to its new yearly highs on Monday. Side by side, the Treasury bond yield is also standing at its new 16-year high. This news acted as a catalyst that triggered a sell-off in XAU/USD and other precious metals.
Why Is Gold Plummeting?
Gold has hit fresh 7-month lows as bearish sentiment surrounds the market of precious metals. Alongside the reasons mentioned above, there were other forces that contributed to the sell-off in gold price per ounce. For instance, The ISM Manufacturing PMI showed a small contraction in factory activity. The shutdown agreement signed on the weekend also put pressure on the demand for gold.
According to the CME FedWatch tool, 74.3% of the traders expect the rates to stay the same, while the remaining 25.7% expect a rate hike to the 550-575 bps target range in November. The tool also shows a 42% possibility of lowering interest rates in the first half of 2024.
Gold Price Forecast
After a breakdown below the diagonal support line, the gold price seems to be targeting the $1809 support level. In the coming days, I expect a bounce from the $1780-$1809 demand zone. The chart below shows the price of the precious metal surging to all-time highs earlier this year after finding support at $1809.
The above thesis is further supported by a bullish divergence on the Relative Strength Index and the Money Flow Index in the lower time frame. However, the Gold price forecast can flip bearish if the price breaks below the $1809 support level and gains acceptance.