On Thursday, October 30, the PCE inflation gauge most closely watched by the Federal Reserve heated up, and US third-quarter economic growth beat expectations, prompting many market participants to bet that the Fed will resume raising interest rates in December, which reversed gold's modest three-day advance and dragged prices to a low of $4,005 per ounce, with the daily chart printing a bearish mid-sized candle.
Yesterday's original approach was to gauge the market's strength or weakness based on a breakout from the prior day's trading range, and since the European session had already broken below the $4,024 low, a weak trend should theoretically have followed, yet the price action bore clear hallmarks of choppy consolidation and grinding. Yesterday two short longs and one bearish idea were shared, especially as US session one-hour candles repeatedly printed long upper shadows around the $4,040 area, showing weak rebound momentum and a slow drift lower that broke the daytime low and extended the decline. Today, Friday, gold opened with a small bounce to $4,032 in the early session, still faltering near the overnight breakdown level, then slid to a low of $3,996 before recovering somewhat, and the metal is currently hovering near $4,012.
Last night it was also emphasized that rebound momentum is weak and that gold would fall further unless it could hold above $4,040, so defending that level meant staying bearish. Today the bearish stance below $4,040 remains unchanged, though the current high has shifted down to the $4,032 to $4,037 zone, and placing a stop there allows for short positions. This rebound is not expected to be very strong, and waiting for a higher level risks missing the entry, so the more aggressive approach is to simply chase shorts near the $4,018 to $4,026 area, then continue adding short positions on the follow-through after a small bounce below the $3,996 low.
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