- Gold is on the verge of a breakout below the symmetrical triangle support, just above S2, as the price oscillates below S1.
- Gold has been a tug of war between the bulls and bears since its break-up in response to investors parking their idle capital during the stock market rout.
- The US dollar is finding its edge again since the FOMC minutes, and US real yields are at the highest they have been in years, pressuring the non-yielding precious metal.
Spot gold has been on the back-foot since the start of the week with Asina stock rebounding lead by Chinese officials jawboning up their markets. Gold fell from 1229 to a low of 1220 on Monday, with most of the hard work accomplished by the bears in European markets.
Gold started to stablise in the NY session, rising to a high of 1223 where it has been capped, despite a poor performance on Wall Street with investors plagued by fears of higher rates and contagion spillover from struggling global markets as well as the ongoing trade dispute between the US and China ahead of the G20 Meetings in November. Between now and then, the dollar is going to be key as its take on the 96 handle while the US 10yr real yields are at the highest they have been since 2011.
Heads will turn to the real US GDP Q3 data
“We expect a 3.7% advance in Q3 GDP, reflecting solid consumer spending (3.3%) and an outsized boost from inventories. Aside from those categories, however, details are more downbeat with muted business investment and a significant drag from trade. Also in the release is core PCE, which we expect to rise 1.6% q/q, implying a 2.0% y/y print for September,” analysts at TD Securities explained.
On a break below the symmetrical triangles’ support, S2 at 1219 guards a run to S3 1215 which is the real breakout area. The theory goes, that the precious metal could fall an equal difference between the triangles highs and lows ($17.5) down to $1,198 taking us to a few dollars short of the 50% retracement Fibo of 15th Aug lows to 15th Oct highs. However, a break back above the 4hr 21-SMA puts the technicals back into neutral.