On November 2nd, last Friday we noted that strong US economic data had further reinforced market expectations for a December rate hike by the Federal Reserve, which put pressure on gold prices. Short-term technical indicators also showed that gold bears held the advantage, with the metal facing further downside risk. In terms of trading, we suggested watching overhead resistance at $4,040 and then $4,070, with downside support at $4,000 and $3,975, followed by $3,943.
Looking at the subsequent price action, after the Asian session opened last Friday, gold came under pressure right away from $4,028 and fell below the $4,000 psychological level during Asian trading, stabilizing at $3,965. After the European session opened, gold rebounded to $3,999 but met resistance and resumed its decline. Once the US session opened, gold's decline accelerated, refreshing a daily low of $3,870 by the close. After this Monday's open, gold rebounded to $3,919 but encountered resistance and is currently trading around $3,898. Overall, gold has come under further pressure, consistent with our expected direction, though its short-term performance has been somewhat weaker than anticipated.
A Wolfinance star analyst believes that gold came under heavy pressure last Friday, hitting a fresh one-year low, with the market's repricing of the Fed's rate hike path serving as the core drag on prices. Specifically, the Fed kept rates unchanged in October, but multiple officials subsequently sent clear hawkish signals, keeping market-implied odds of a Fed rate hike near the elevated level of 80%. The Fed's high-rate expectations have raised the opportunity cost of holding gold, making it difficult for gold's rebounds to be sustained.
Looking ahead, the dominant logic currently weighing on gold — namely December Fed rate hike expectations — has yet to show any substantive loosening. This Tuesday's US midterm election results and Friday's US nonfarm payroll data will be the key variables to test this logic. The former could influence gold prices through fiscal policy expectations and risk appetite, while the latter could affect December rate hike pricing through employment data, thereby influencing gold prices.
On the daily chart, gold tumbled last Friday, coming under pressure for a third consecutive week and hitting a fresh one-year low, with weak short-term performance. For downside support, watch last Friday's low of $3,870; if that is broken further, watch the $3,800 area. For overhead resistance, watch the intraday rebound high of $3,920, followed by $3,943, the one-year low from which gold broke down last Friday. The 5-day moving average and MACD indicator are in a bearish cross pointing downward, the KDJ indicator is also in a bearish cross pointing lower, and the RSI indicator shows a bearish cross with a slight upturn, all operating in weak territory. Short-term technicals show bears hold the advantage, and gold still faces the risk of another decline.
Gold intraday reference: The market maintains relatively high expectations for a December Fed rate hike, raising the opportunity cost of holding gold, making rebounds difficult to sustain and weighing on gold prices. In terms of trading, a range-bound approach is recommended, with overhead resistance at $3,920 and $3,943, downside support at $3,870, and the $3,800 area if that support is broken.
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