On October 29, gold edged higher in the early European session and was last seen hovering near the top end of its daily range which is located just above the $1880 zone. The precious yellow metal managed to regain some positive traction on Thursday and it recovered some of yesterday’s sharp losses. The losses had pushed the metal to one-month lows amid a subdued US dollar demand.
Furthermore, the uncertainty over the outcome of the US presidential election held the dollar bulls back and prevented them from placing aggressive bids. That, in turn, was considered to be a major factor providing some support to the dollar-denominated haven commodity.
It is worth noting that national polls have indicated in recent months that Democrat presidential nominee Joe Biden has a lead over the Republican incumbent President Trump. Nonetheless, investors remain wary on the back of a small gap existing in various key swing states.
Adding to these uncertainties is the possibility that the outcome may be contested which has further driven investors towards the haven yellow precious metal. Despite all these supporting factors, the uptick did not record a strong follow-through amid a strong rebound in the United States equity futures. Furthermore, the overnight break below the 100-day SMA support for the first time since March 2020 also justifies some caution for the bullish traders.
Therefore, any further move up might still be considered as a selling opportunity and runs the risk of drying up rather rapidly. Taking that into context, investors may still prefer to wait on the sidelines ahead of the key release of the Advance Q3 GDP report later on Thursday.
The US economy is expected to have grown by almost 31% annualized pace in the July-September quarter. Any notable divergence from the expected figures may introduce some volatility in the financial markets. That volatility may enable traders to grab some worthwhile opportunities to make some profits.
Gold Bears Target A Decisive Break Under $1871
During the European session, gold is licking wounds after sinking below $1870 yesterday. The precious metal dropped amid a strengthening haven demand for the US dollar after partial lockdowns on France and Germany threatened to derail the global economic recovery.
The ‘sell everything mode’ returned to the markets amid renewed COVID-19 fears which made gold to tumble alongside stocks. Gold closed below the crucial 100-DMA support of $1887 on the daily charts for the first time since March. Will gold resume its downtrend?
Critical Supports And Resistances
The Technical Confluences Indicator currently indicates that gold is attempting to break the $1884 barrier, which is the confluence level of the SMA5 four-hour and Fibonacci 23.6% one-month. The next resistance has formed at $1887, which is the place where the pivot point one-week S1 coincides with SMA 100 one-day chart.
Looking further up, you find the intersection of the past week’s low and SMA10 4-hour at $1895, which will offer some resistance. A sustained move above $1904 is crucial to reduce the bearish pressure in the near-term. That level is the powerful confluence of Fibonacci 38.2% 1-month and SMA10 one-day.
On the other hand, a strong move below the $1871 cushion, which is the convergence of the Fibonacci 161.8% one-week and pivot point one-week S2 will open the door for a test of the $1860 pivot point one-day S1.