Gold is consolidating near 4,175 USD while traders weigh the Federal Reserve's next move, US dollar movements and safe-haven demand. The main trend on the H4 chart remains downward, and the current rise is corrective.
Gold is consolidating near 4,175 USD on the H1 chart as the market waits for signals from the Fed. In the short term, it matters whether fresh US inflation data prompt a more hawkish stance from the central bank.
Fed signals leave the outlook mixed
US inflation accelerated to 3.7% year-on-year in September, while core inflation stood at 2.6%. Fed Chair Kevin Warsh gave no clear signal of another rate hike in October, which eased investors' concerns about further tightening.
Tensions in the Middle East and concerns over public finances are supporting demand for safe-haven assets. However, rising oil prices could sustain inflationary pressures and complicate any move by central banks towards policy easing.
A weaker US dollar, lower bond yields and ETF demand support gold, according to the analysis. Rising US inflation and the risk of a Fed rate hike limit further gains.
Gold trades in an upward correction
On the H4 chart, gold completed a downward wave at 4,071 USD before forming an upward correction towards 4,184 USD. The market continues to consolidate below resistance at 4,231 USD. The MACD signal line remains below zero, which indicates the current rise is corrective.
On the H1 chart, the market broke above 4,145 USD and moved towards resistance at 4,185 USD. A close above that level would open the way towards 4,220 USD, where buyers are expected to face a test.
Levels to watch
An alternative scenario envisages a return to 4,145 USD, followed by a decline towards 4,123 USD. A break below that support would increase the likelihood of a downward wave towards 4,060 USD and 4,022 USD.
The Stochastic oscillator's approach to overbought territory also increases the likelihood of a short-term correction. The near-term direction will depend on Fed signals and movements in bond yields.
Source: ActionForex
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