Gold: Does today’s 2% rally change the recent bearish trend?
Matt Weller, CFA, CMT October 1, 2021 5:06 AM
To save you time answering the title question: No. Or at least not yet.
As we’ve touched on repeatedly, month-end strength in the US dollar has been one of the dominant themes of the month, with big implications for everything from indices to interest rates to commodities.
One of the bigger causalities of the greenback’s recent strength has undoubtedly been gold. After testing its 3-month highs at $1833 at the start of the month, the yellow metal has traded consistently lower within a bearish channel over the last four weeks. Adding insult to injury for gold bulls, the precious metal closed at its lowest level in six months yesterday, despite ongoing inflation concerns and low/negative interest rates across the globe:
Source: TradingView, StoneX
So what’s the outlook for gold moving forward?
Well, it remains to be seen, but as of writing the technical picture remains downbeat, with the yellow metal still trending lower within its 1-month descending channel and still below even its short-term 21-day EMA.
That said, there are some nascent signs for optimism among gold bulls: The commodity is bouncing off previous support in the $1730 area, and the RSI indicator is peeking out of its equivalent bearish channel, suggesting that the surge of buying pressure may be enough for a breakout in price itself.
This leaves gold at a potentially attractive trading level for bulls and bears alike. If prices can break conclusively above resistance from the bullish channel and 21-day EMA near $1765, it could signal a new bullish leg toward $1800 or even the previous highs at $1833 next. On the other hand, a failure to break out from the established bearish channel despite today’s strong price action would signal that the bears still have the upper hand and augur for a retest of the $1725 level if not the multi-year lows down around $1680 in the coming days.
How to trade with City Index
You can trade easily trade with City Index by using these four easy steps:
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.