Gold: Technical Indicators Suggest Further Fall Amid Hawkish Fed, Inflation

www.investing.com/analysis/gold-technical-indicators-suggest-further-fall-amid-hawkish-fed-inflation-200642357

By Satendra Singh | Oct 03, 2023 12:51PM ET

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Since I wrote my last analysis on September 27, gold experienced a significant downward trajectory. This decline can be attributed to deteriorating technical indicators, exacerbated by persistant inflationary pressures, which is pushing the Federal Reserve to maintain rates higher for longer.

Gold Futures Weekly Chart

The so-called 'Angle of Depression,' which historically stood at 63 degrees, has taken a sharp turn, increasing to 80 degrees since mid-September, as revealed on the weekly chart.

Following a substantial gap-down in the gold December 2023 futures, the weekly candle for the current week indicates a potential continuation of the downward spiral. There appears to be little impetus for bearish sentiment to wane, especially as the gold December futures approach a critical support level: the 200-Day Moving Average, currently residing at $1818 on the weekly chart.

The decline in gold futures gained momentum following a sustained drop below the significant $1931 level on September 26th. This subsequent selling spree drove gold futures down to test the next support level at $1830 during today's trading session.

This underscores the growing exhaustion among gold bulls, compounded by various factors ranging from the Federal Reserve's statements to mounting uncertainty regarding the utility of gold as an investment, particularly as the dollar index sits at an 11-month high—a clear sign of escalating inflationary pressures.

As of October 3, 2023, despite the tug-of-war between gold bulls and bears, the prevailing uncertainty in the market may continue to exert pressure on December futures until their upcoming expiration date.

Indeed, the fate of December futures at expiry could prove decisive, especially if they remain below the 200-Day Moving Average on the weekly chart.

Gold Futures Daily Chart

On the daily chart, the weakness in gold futures has become strikingly apparent since the formation of a highly bearish crossover on September 27, 2023.

This crossover was marked by a sharp downward plunge in both the 9-Day Moving Average and the 18-Day Moving Average, both of which dipped below the critical 200-Day Moving Average. This development serves as a strong confirmation that the downward trend is likely to persist until the end of October 2023.

***

Disclaimer: The author of this analysis does not have any position in Gold futures. All the readers are requested to take any call at their own risk as the opinion is based on technical formations by the gold futures in different time frames.

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Gold: Technical Indicators Suggest Further Fall Amid Hawkish Fed, Inflation

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