Gold Prices
Gold price (XAUUSD) is little changed today as traders ponder the next move. That is after the metal ended September down by ~4%, making it its worst month in nearly four years. It is trading at $1,895, which is slightly higher than yesterday’s low of $1,890.
Gold price declined in September primarily because of three main things. First, the stronger dollar helped put pressure on the metal. The dollar index increased by ~2% in September. And since gold is usually traded in dollars, its price tends to weaken whenever the greenback gains. Phillip Streibe, an analyst explained this better to CNBC:
“Whenever the dollar index rallies, we see a deflationary environment and that weighs on not only the prices of gold but also silver and a lot of other commodities.”
Gold also declined because of technical factors. Historically, the price of gold tends to decline whenever it reaches an important psychological level. In this case, the price had just reached an all-time high of more than $2,000, which pushed some holders to exit.
Third, gold price fell in part due to the overall sell-off in global markets. In the final part of the month, we saw most indices like the Dow Jones and S&P 500 pullback.
Analysts are torn about whether gold price will rise in October. There are some who expect the price to rise as traders increase their hedges against risk ahead of the US election. In a statement, George Milling, an analyst at State Street said:
“Gold has thousands of years of a track record of offering some form of protection against the unexpected. That’s worth having.”
Most of these investors expect demand for gold, especially from institutional investors to keep rising in the near term.
The three-hour chart shows that gold price has been in consolidation mode in the past few days. The After a significant jump, the price seems to be forming a bullish consolidation pattern that is shown in green. The price is being supported by the 25-day and 15-day exponential moving averages.
Therefore, in the near term, I suspect that the pair will break out higher as bulls aim for the resistance at $1,906, which is its September 8 low. On the flip side, a move below the lower side of the consolidation will open the possibility of the price falling to below $1800.
