Spot gold is still in a sideways trend as the market strives to recover some of last week’s losses. But, the upside momentum is capped by strong resistance at 1904/08. On its part, the spot silver market has broken low out of the ascending triangle although it later bounced back for a selling opportunity at $24.40/50 with stops located above $24.70.
On the daily charts, gold is trying to break above the resistance at 1904/08, and it initially targeted the 1896/95 level that held strong on all three tests last week. More losses target 1890 before the support at the 100-day moving average at 1882/80 comes into play.
The first resistance at 1904/08 will require stops above 1912/13 for the traders who are shorting gold.
Any break higher will target 1917/18, and a sustained move past 1920 will support recovery to 1925 and a test of the strong resistance that has formed at 1930/32. Silver is holding a strong resistance at 24.40/50 and originally targeted 24.20/10. A break lower will target 24.05/00 then 23.60/50, and more losses open the door for 23.10/00.
On the other hand, the shorts located at 24.40/50 have set their stop above 24.70. Any move higher is a buy signal that will target25.10/20, and a further surge above 25.30 is another buy signal.
A Slight Drop In Gold Market
On October 27, 2021, gold witnessed some new selling pressure at higher levels and drifted into a negative zone. A slight pickup in the US dollar demand and some stability in the equity markets contributed to the pullback that was recorded in the Asian and early European sessions.
The bears seem to be ready to extend the downward trajectory below the psychological $1900 round-figure mark. The non-yielding precious metal failed to capitalize on an early uptick. Instead, it encountered fresh supply near the $1910 zone with the emergence of some new buying around the US dollar.
Increasing market worries about the second wave of coronavirus in the US and Europe continued to offer some support to the dollar’s status as the global reserve currency. That was seen as a major factor piling some pressure on most of the dollar-denominated commodities like gold.
On top of that, stability in the equity markets after an overnight selloff in the US undermined demand for the haven gold. But, investors remain worried about a further escalation in diplomatic tension between the US and China. This tension, and the uncertain US political situation, might benefit gold and help limit any further losses for now.
The US-China tensions increased over a possible $2.4 billion sale of the US anti-ship missiles to Taiwan. China reacted to that news by putting sanctions on American companies. Furthermore, China’s Foreign Ministry was out with a statement that urged the US to withdraw the Taiwan arms sales plan and cease any arms sales and military contact with Taiwan.
In the meantime, the market might have already begun pricing in a strong Democratic victory at the forthcoming US election on November 3. Nevertheless, the increased uncertainty about the real outcome may continue to drive some of the haven flows and lend support to the XAU/USD market.
Experts say that it is wise to wait for some major follow-through selling before the traders begin positioning for an extension of the pullback that happened from the $1931-33 supply zone.
Participants now look ahead to the United States economic docket, taking a look at the release of Durable Goods Orders data. The wider market risk sentiment and developments that surround the COVID-19 pandemic may influence the dollar price dynamics and produce some significant trading opportunities around gold.