Gold Crashes Through Support and Further Downside Looks Likely

Summary:

The price of gold fell hard last week to close below a key support level and further losses look likely for bullion as the dollar rebounds.

The price of gold fell hard last week to close below a key support level and further losses look likely for bullion. The drop in gold correlated with a surge in the U.S. dollar and big ETF fund outflows for the week could be another drag on the precious metal.

Data out for the week to September 23rd saw Exchange Traded Funds lose $1.23 billion in outflows from tech funds. This was a sign that the September pullback in stocks had given retail investors cold feet. It’s also important for gold and other commodities because the ETF market was at record highs in the second quarter after the market crash and commodity funds saw money flowing in during the first and second quarter. If this trend is reversing then it would be the removal of another trend that has driven gold prices higher this year.

The economic calendar is big for the U.S. dollar this week and gold will track any volatility in the greenback. Wednesday sees finalized GDP for the second quarter, but the key releases will be Thursday’s PCE inflation numbers. The Federal Reserve has committed to an inflation target of 2% and the last inflation number from the U.S. was 1.3%. If we see any sign that prices are getting hot in the U.S. then the dollar could rally hard on the outlook for less stimulus and a quicker return to higher rates. Manufacturing PMIs for the United States are also released on Thursday, whilst Friday sees Non-Farm Payrolls for the month.

Gold Price Technical Outlook

The price of gold crashed through key support at $1863 last week and the price action favours a further correction. The first big support level looks to be at the 50-day moving average at $1,700. The price could still make a base and bounce higher but a return to $2,000 looks unlikely in the near-term. The Investing Cube team is currently available to assist all levels of traders with a Forex Trading Course or one-to-one coaching.

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