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Gold Technical Analysis – October-19-2023

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In our Gold Forecast October 2023, we delve into the intricate dynamics of the gold market. From the influence of global events such as the Middle East war to financial indicators like US Treasury yields, we examine how these factors have shaped gold’s price journey. Join us as we unravel the complexities of gold trading in these volatile times.

Impact of US Treasury Yields

Reuters – Gold is now selling for almost $1950 per ounce. It’s been on the rise since the end of July, when it was at $1810. In late September, gold’s value dropped quickly because US Treasury yields (the return on investment for US government debt) went up. But this stopped after a report about jobs came out. People started guessing that the Federal Reserve (the US central bank) might not increase interest rates in November, but maybe in December.

Effect of Middle East War

The war in the Middle East gave gold a boost and caused a jump in price on Monday, 9 October. This is still going on, but it’s already factored into the price and probably won’t affect it much in the next few days. There’s no big movement of money out of stocks or bonds, so there’s no real reason for people to buy gold.

We should also note that the war in the Middle East isn’t a good reason to bet on gold going up in the long term. The unstable situation doesn’t encourage steady demand. The conflict between Russia and Ukraine caused a similar jump in price, but that was because people were worried about supply from a major producer. Even then, the price ended up lower than where it started before the “war rally”.

Bond Prices and Equity Market

Meanwhile, bond prices have dropped again this week. The yield on 10-year Treasury bonds is close to 5% – the highest it’s been since 2007. It hasn’t been this high consistently since 2002. This is starting to make people nervous about investing in stocks, but gold isn’t affected by this yet, even though it was the main reason for its drop last month.

Gold is also holding steady against the dollar, which has gained back more than half of what it lost earlier in October. This means that gold is going up even though conditions aren’t favorable. It might start to lose momentum soon.

Gold Technical Analysis: Swing Trading Strategy

FxNews – The XAUUSD pair has been on an upward trajectory since October 25. This bullish trend was marked by a significant breakout from the bearish channel, which was subsequently tested on October 17. Currently, the yellow metal is not just surpassing its September high of $1,949 resistance, but also trading above the Ichimoku cloud.

The position above the Ichimoku cloud is a strong indicator of a bullish bias in the market. This suggests that investors are optimistic about gold’s future performance and are willing to buy at current prices in anticipation of further increases.

Gold Technical Analysis - October-19-2023

Gold Forecast October – Chart by TradingView

In terms of technical indicators, the Stochastic oscillator is currently in the overbought zone. This typically suggests that the asset has been bought excessively and could be due for a price correction. However, it’s worth noting that the Relative Strength Index (RSI), another momentum indicator, still has some room before reaching the overbought area.

This divergence between the two indicators suggests that while gold may be overbought according to the Stochastic oscillator, there may still be some upward momentum left according to the RSI.

Given these conditions, there is potential for gold’s price to rise higher and target the $1,989 resistance level. However, it’s also possible that we might see a retest of the $1,920 level before any further gains are made. This could provide an opportunity for investors who missed out on the initial breakout to enter at a more favorable price point.

Final Words

In conclusion to our gold forecast October, while gold’s current bullish trend and its position above the Ichimoku cloud suggest potential for further gains, investors should also be mindful of technical indicators such as the Stochastic oscillator and RSI which suggest that a price correction could be on the horizon.

  • 19 October 2023
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