Gold prices show upside potential, but bulls remain cautious

On October 1, gold prices fell slightly from near this week's high. Earlier, the fall in US Treasury yields triggered by risk aversion saved the gold bulls. The price of gold rebounded from a seven-week low and returned to above $1750. The current hourly chart of gold shows that there is still hope for the price of gold to rise further, but the stagnation of the dollar has put pressure on gold. The market remains cautious until the US personal consumption expenditure data is released in the evening.

Gold prices rebound from 7-week lows

After hitting a new one-week high on Thursday, the price of gold fell on Friday, but it was still trading above US$1750. Signs of a rebound in the dollar's decline have put pressure on gold prices. Data released on Thursday showed that the US gross domestic product (GDP) in the second quarter increased by 6.7% year-on-year, slightly higher than market expectations of 6.6%. The optimistic data supports the US dollar.

On Friday, Chicago Fed President Evans called for patience with inflation and believed that in order to push the inflation level back to 2%. The current level of ultra-low interest rates is still necessary. A majority of the U.S. Senate voted on Thursday that the government will continue to operate in full at the beginning of the new fiscal year.

With the postponement of voting for the US infrastructure bill, rising inflation concerns, and concerns about global economic growth, the market remains risk-averse. Therefore, while the dollar is trying to resume its upward trend, US Treasury bonds are experiencing a recovery in safe-haven capital flows, which has seriously dragged down the yield of the entire curve.

Despite the rebound in gold prices, the Fed's expected interest rate cuts and subsequent interest rate hikes are heating up, which may keep the bulls nervous. At the same time, the upward revision of the final valuation of US GDP in the second quarter and the expectation of the Fed's tightening policy continue to weaken the recovery of gold.

The market’s attention is now turning to the US Personal Consumption Expenditure (PCE), ISM Manufacturing PMI (ISM Manufacturing PMI) and the revised Michigan Consumer Sentiment Index (Michigan Consumer Sentiment).

Gold price technical analysis

From a short-term technical point of view, the hourly chart of gold prices confirms the reversal of the decline, which shows that the price of gold is still rebounding towards the goal of $1,797.

However, for people who are bullish on gold, this may be a rough journey, as investors remain cautious until the arrival of intraday inflation data. If the price of gold can effectively break Thursday's high of $1764, it may increase interest in renewed bullishness. The relative strength index (RSI) is stable above the midline, suggesting that the price of gold still has room for further upside.

On the downside, the lower support level first looks at the 21-day moving average at $1747. Once broken, the low of the previous week's $1738 level will provide further support.


(Spot gold daily chart)

GMT+8 At 15:30 on October 1, spot gold was quoted at $1,753.252 per ounce.