Retreating US yields, escalating
September Retail Sales data will be featured in the US economic docket on Tuesday. Investors expect an increase of 0.3% on month following the 0.6% growth recorded in August. Since this data is not adjusted for price changes, it is likely to be ignored by market participants.
In the Asian session on Wednesday, third-quarter Gross Domestic Product data from China will be watched closely by investors. The Chinese economy is forecast to grow at an annual rate of 4.4% after expanding 6.3% in the second quarter. A disappointing GDP reading could revive concerns over a weak demand outlook for Gold and cause XAU/USD to turn south.
The Fed’s blackout period ahead of the November policy meeting will start on Saturday, October 21. Hence, Fed policymakers will likely use next week to steer the markets in a certain direction. In case officials continue to cite rising yields as a reason to hold the policy rate steady, US T-bond yields could continue to stretch lower and allow XAU/USD to extend its uptrend. A yield of 4.5% aligns as a key support level for the 10-year US Treasury. If that level turns into a resistance, another leg lower in the 10-year yield could be seen. If officials reiterate the data-dependent approach to policy and refrain from rejecting further tightening until they see more evidence of softening inflation, the pair could have a difficult time gathering bullish momentum.
Markets will pay close attention to geopolitics as well. The impressive rally seen in XAU/USD on Friday suggests that Gold is likely to continue to benefit from a further escalation in tensions in the Middle East.
Gold technical outlook
The Relative Strength Index (RSI) indicator on the daily chart climbed above 50 and XAU/USD surpassed the 20-day and the 50-day Simple Moving Averages (SMA) on Friday, highlighting buyers’ dominance. On the upside, $1,925-$1,930 (100-day SMA, 200-day SMA) aligns as an important resistance. A daily close above this hurdle could bring in technical buyers and open the door for another leg higher toward $1,960 (Fibonacci 23.6% retracement of the latest uptrend) and $1,980 (static level).
In case XAU/USD retreats below $1,900 (Fibonacci 38.2% retracement, 50-day SMA), sellers could take action. In this scenario, $1,875 (20-day SMA) could be seen as first support before $1,850 (Fibonacci 50% retracement).
In the Asian session on Wednesday, third-quarter Gross Domestic Product data from China will be watched closely by investors. The Chinese economy is forecast to grow at an annual rate of 4.4% after expanding 6.3% in the second quarter. A disappointing GDP reading could revive concerns over a weak demand outlook for Gold and cause XAU/USD to turn south.
The Fed’s blackout period ahead of the November policy meeting will start on Saturday, October 21. Hence, Fed policymakers will likely use next week to steer the markets in a certain direction. In case officials continue to cite rising yields as a reason to hold the policy rate steady, US T-bond yields could continue to stretch lower and allow XAU/USD to extend its uptrend. A yield of 4.5% aligns as a key support level for the 10-year US Treasury. If that level turns into a resistance, another leg lower in the 10-year yield could be seen. If officials reiterate the data-dependent approach to policy and refrain from rejecting further tightening until they see more evidence of softening inflation, the pair could have a difficult time gathering bullish momentum.
Markets will pay close attention to geopolitics as well. The impressive rally seen in XAU/USD on Friday suggests that Gold is likely to continue to benefit from a further escalation in tensions in the Middle East.
Gold technical outlook
The Relative Strength Index (RSI) indicator on the daily chart climbed above 50 and XAU/USD surpassed the 20-day and the 50-day Simple Moving Averages (SMA) on Friday, highlighting buyers’ dominance. On the upside, $1,925-$1,930 (100-day SMA, 200-day SMA) aligns as an important resistance. A daily close above this hurdle could bring in technical buyers and open the door for another leg higher toward $1,960 (Fibonacci 23.6% retracement of the latest uptrend) and $1,980 (static level).
In case XAU/USD retreats below $1,900 (Fibonacci 38.2% retracement, 50-day SMA), sellers could take action. In this scenario, $1,875 (20-day SMA) could be seen as first support before $1,850 (Fibonacci 50% retracement).
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