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  • Despite easing from five-month highs, gold is pressured around intraday lows and snaps a seven-day uptrend.
  • The market is dampened by concerns about inflation and stimulus.
  • Risk-on mood boosted by China data, PBOC moves, US retail sales, Sino-American talks.

The gold price (XAU/USD) is down $1,857 on the first day of eight losses on early Monday. Meanwhile, since June, the yellow metal has fallen from its highest levels and has pulled back from its annual resistance line. However, with the mixed sentiment, the pullback isn’t lowering US Treasury bond yields or the US dollar.

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Friday, the US Dollar Index (DXY) was down 0.11% for the day, continuing a downward trend from July 2020’s peak. The 10-year US Treasury bond yield has consolidated its previous week’s recovery and dropped three basis points (bp) to 1.55% at the latest. The overall market sentiment is moderately positive, reducing the demand for gold as a safe haven.

Investors are worried about US stimulus and inflation, as well as a Fed rate hike after unexpectedly bleak consumer sentiment data in Michigan on Friday fell to a 10-year low. Furthermore, recent comments from Treasury Secretary Janet Yellen and Federal Reserve Bank of Minneapolis President Neil Kashkari, linked to hopes for a US-China Phase 1 deal, are encouraging sentiment.

Treasury Secretary Yellen denied speculation that incoming stimulus would boost inflation, but Fed’s Kashkari insisted the inflation rise was “temporary.” FT also reported that US President Joe Biden and Chinese President Xi Jinping will discuss ways to prevent tensions from escalating into conflict amid growing concerns over Taiwan and Beijing’s nuclear arsenal.

The October US retail sales report, which is expected to grow 0.7% month-over-month on Tuesday, will be a key catalyst in gauging near-term trends. In addition, the US aid package will be promoted, and negotiations between the US and China will take place. If reflation fears subside, as they are now, gold may see a welcome retreat.

Gold price technical analysis: Double top remains the key

gold price chart

The gold price found a strong resistance near $1,870, making a double top and falling below $1,860. The first support at 20-period SMA on the 4-hour chart will be the key. If the sellers successfully break the level, the gold price will be vulnerable to fall further towards $1,840 ahead of $1,832.

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Alternatively, if the price breaks the double top at $1,870, we may see a surge towards $1,885 ahead of $1,900 and then $1,920.

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