Gold prices hit successive gains and climbed to a two-week high as the U.S. dollar remained moderately challenged by the upcoming US presidential debate and after the missed U.S. housing-sector data. The yellow metal extended its gains after the remarkable recovery of China’s economy, one of the top gold enthusiasts worldwide.
The decline in housing starts put pressure on the highly expected rate increase as the Federal Reserve seeks a more stable economic recovery. Although the chance of an adjustment in the benchmark rate still stands at approximately 70 percent, the dollar came a tad lower in the late trading session on Wednesday.
Meanwhile, the upcoming presidential debates also made most of the investors extra cautious as the presidential aspirants disclose their respective economic plans. Economic and political serve as the main factors that the U.S. central bank considers before imposing interest rate policy modification. On the other hand, the current reports on US employment and inflation raise the chance of a December rate hike.
As the interest rate gets higher, the value of the currency moves up as well. The inverse relationship of the yellow metal and the US currency explains that when the dollar goes down, the demand for the commodities such as gold increases and an increase of demand will drive the prices higher. Also, weak currency tends to make the investors interested in alternative investment sources and the yellow metal becomes their primary choice.
Gold Recap
The graph below shows the price movement of gold this week. The yellow metal started at short bounce back at 1252.58 (1) and as the bullish tone built up, it touched 1273.02 (2) before the market closed on Wednesday. During the middle of the week, the candles went beyond the upper barrier of the band (3) and as expected a significant price movement occurred. From an apparent offensive ground, the metal even ticked higher as it moved from 1264.12 to 1270.94 (4).
Gold Outlook
As 11:03 UTC, the yellow metal was trading at 1271.24 after opening strongly at 1269.18. With 4947 total traded volume, gold had a session high of 1272.19 and a session low of 1268.07. If the bullish path will persist, the metal could possibly have resistance at 1273.02 and support at 1262.70. The graph shows that the proceeding candles could break the resistance, indicating a stronger uptrend. Going beyond the upper band, the prices are generally thought to be overbought and this will signal for a pull back soon. Additionally, the band suggests that there could be a high volatility as it continues to expand in the following sessions.
The TradingBanks group of analysts expects the yellow metal to hit the range between $1290 to $1350 before the end of 2016. In light of the associated factors in the price movement of the yellow metal, an upbeat outlook is raised before the conclusion of the highly anticipated December rate hike. Oversea-Chinese Banking Corporation Limited supported this view after claiming that gold prices may rally further into the year-end as the market waits for the outcome of the presidential elections in November and the monetary decision of Fed at the end of the year.