It’s not every day you see gold plunge alongside yields. But that is what Monday served on reports of a potential ceasefire in Gaza and Trump’s picking a relatively ‘safe pair of hands’ for the US Treasury Secretary role. With a prominent swing high on gold, I suspect it could be headed much lower from here.
By :Matt Simpson, Market Analyst
A lively start to the week saw gold plunge alongside the US yield curve, the Dow Jones leave the S&P 500 and Nasdaq 100 for dust to reach a record. The USD index also provided a minor pullback to allow EUR/USD back above 1.05.
Gold posted its worst day’s decline in four years thanks to two key developments: Israel agreed to a ceasefire deal with Hezbollah “in principle” and Trump nominated Scott Bessent as US Treasury Secretary, both of which likely saw gold’s safe-haven demand drop alongside prices. While Bessent’s economic views tend to back economic growth and therefore be seen as inflationary, he is deemed as a highly experienced, level-headed safe pair of hands for Trump’s cabinet. And someone who may take the sting out of some of Trump’s policies, such as aggressive tariffs which many feared were indeed inflationary.
This saw investors step back into the bond market with gusto, particularly at the middle-to-long end of the curve (10-30 years) and suppress yields. The 10, 20 and 30-year yields suffered their worst day in three months, the 2-year its worst in two months.
Still, the 200-day MA is nearby to provide potential support over the near term. But if Bessent lives up to expectations, we may see the sting taken out of Trump trades which could cap gains on the USD and yields, if not send them lower.
Click the website link below to get our exclusive Guide to gold trading in Q4 2024.
https://www.forex.com/en-us/market-outlooks-2024/Q4-gold-outlook/
Gold technical analysis:
A prominent bearish engulfing candle has formed on gold’s daily chart, with its 3% loss on the day being its worst since November 2020. Daily volume was its highest in nine days, suggesting that bears piled in while bulls also ran for cover.
Given the decline from the all-time high (ATH) to the weekly and monthly volume points of control (VPOC) occurred in three waves, it is likely that the 2541.5 low marked the end of wave ‘a’ for an ABC correction. Assuming Monday’s high was the end of wave ‘b’, wave equality for wave ‘c’ could land around 2460.
The bias is for gold prices to continue lower, which could allow bears to fade into rallies. Note that Friday’s low (2670) lands around the 50-day SMA (2678), which could allow bears to reload if prices retrace there.
The 1-hour chart shows a strong bearish trend has developed. Support has been found around a high-volume node (HVN) and weekly S1 pivot at 2614.6, and a bullish divergence has formed in the oversold zone on the RSI (2). Perhaps we’ll get at least a minor bounce before prices continue lower. Note another HVN at 2573.7 and the weekly and monthly VPOC’s around 2340 which could provide potential support along the way.
Events in focus (AEDT):
- 10:50 – JP corporate services price index
- 16:00 – JP CPI (BOJ)
- 16:00 – SG industrial production
- 19:00 – UK BOE, PMC member Pill speaks
- 21:00 – EU ECP McCaul speaks
- 00:00 – US building permits
- 01:00 – US house prices
- 02:00 – US consumer sentiment
- 06:00 – US FOMC minutes
View the full economic calendar
– Written by Matt Simpson
Follow Matt on Twitter @cLeverEdge
The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.