Gold Escaped the Downtrend Channel, Levels to Watch

Gold Fundamentals

This Wednesday, November 2, the Federal Reserve repeatedly increased the interest rate by 0.75 percentage point. The statement following the hike on the rise of the target range for the federal funds rate to 3-3/4 to 4 percent sinked the DXY the same day.

Although DXY was able to regain some of its losses the next day on November 3, the negative employment data released today turned the US Dollar index red again. The reason is the market is watching closely the outcomes of the FED’s plans which are to achieve maximum employment and inflation at the rate of 2 percent.

Gold has been on a sell side since April this year. Gold ETF flows is one of the indicators identifying the global sentiment of the Gold demand.

As for central banks reserve changes, only 4 states continued their intense gold purchase plan for the year, which are Uzbekistan, India, Egypt and Turkey. The rest CB’s were either selling some of their reserves or did not take any purchase or sell actions.

Hence, it’s fair to say that Gold’s current bullish mood is related to the drop of the US Dollar Index.

What Do Technicals Say?

The XAUUSD made an important test and a breakout from the dynamic resistance of March 2022. The $1615 – $1617 support level withheld a downtrend pressure backing a formation of a triple bottom pattern.

As of now, XAUUSD is traded at $1674 and is testing a major resistance at this level. To close the trading week, Gold might retrace from these levels near $1655, gain more power and try to break the $1674 resistance later. RSI and MACD remain bullish, RSI is still far from the overbought levels and MACD shows a strong upcoming push for an uptrend.

When the uptrend continuation is confirmed, and gold closes above $1674, look for resistances at $1720 and $1801. Markets will be also watching China’s statements for renewal of airline travels and the US inflation data which will be released on November 10, next week.