Gold fell on Monday after a two-day rally, and the analyst behind the piece wants price confirmation before calling a bottom. A stronger dollar and rising oil add pressure ahead of US CPI on Wednesday, October 14.
Gold fell along with major FX pairs in the first half of Monday's session, after a relatively sharp two-day rally at the end of last week. The loss of momentum has raised fresh doubt that the metal has bottomed out.
The analyst says gold is still not in a technically bullish environment, even though the analyst remains fundamentally bullish in the longer run. Wednesday's CPI release could set the tone for the dollar and potentially gold.
Gold stalls below resistance at $4,230-$4,265
Gold rallied from a key technical area between $4,080 and around $4,100 last week. That zone is where the previous rally started in early August.
Gold has broken above the short-term bearish trend line, but there has been no meaningful upside follow-through. Price remains below the 21-day exponential moving average, and resistance around $4,230 to $4,265 has held so far.
If resistance between $4,230 and $4,265 breaks, the $4,325 area could be the next target, with $4,400 and then $4,500 above it. If gold breaks below $4,080-$4,100, it could see further downside towards $4,000, with the June low around $3,942 coming into focus thereafter.
Dollar and oil weigh on the metal
Fresh gains for the dollar are holding gold back, thanks largely to further gains in oil prices that undermine currencies of energy-importing nations like the JPY, GBP and EUR. Brent has closed in on the $105 level, testing its highest levels since mid-September.
The source ties the oil rise to Iran dismissing a US proposal to reopen the Strait of Hormuz as insufficient and stepping up attacks in the Gulf region. It also points to US Gulf Coast supply disruptions after Hurricane Eceas made landfall, with more than 60% of regional oil production reportedly taken offline.
Inflation data and central bank speeches ahead
Gold has held up better than some major currency pairs. Investors appear to be buying despite risks of tighter monetary policy, because of concerns that inflation may again overshoot due to high oil prices. Gold-backed ETFs kept receiving inflows during the recent price declines, and China continues to accumulate gold.
CPI has been easing in recent months and stood at 2.4% year on year in August. September inflation data arrives Wednesday, with PPI due on Thursday. Heads of major central banks speak from Wednesday at the IMF and World Bank Annual Meetings in Bangkok, and Fed's Warsh speaks on Friday.
Source: Investing.com
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