Gold Outlook | 24 October 2017
Gold prices rebounded on Monday, recovering some of their losses from the previous week, though the move was not particularly big. The precious metal has been under pressure overall recently, weighed on by the absence of any news on the geopolitical front that could spark a new round of safe haven inflows. In addition, the dollar has been in recovery-mode lately, another factor that likely put downward pressure on gold.
Without anything on the horizon suggesting that these two dynamics might change, we see the case for the precious metal to continue drifting lower over the next days. Headlines related to North Korea are practically impossible to predict, but assuming nothing happens for a while, the latest risk-on market mood could continue. Meanwhile, even though there are many risk events for the USD on the calendar over the next couple of weeks, it would take a major disappointment in economic data for the currency to resume its broader downtrend, we think.
Gold traded higher on Monday after it hit support at 1273 (S1). Nevertheless, the rebound was stopped during the Asian morning Tuesday by the 1283 (R1) line, and then the precious metal retreated somewhat. Following the rejection from slightly above the psychological zone of 1300 (R3) on the 16th of October, the price structure has been lower peaks and lower troughs. As such we believe that the short-term outlook is negative and that the next leg may be to the downside. We expect the bears to target once again the 1273 (S1) barrier, where a clear dip may see scope for extensions towards our next support level of 1260 (S2).
Switching to the daily chart, we see that the yellow metal continues to trade within the wide sideways range between the psychological zones of 1200 and 1300 (R3), which keeps the bigger picture still flat. Having said that though, the fact that on the 16th of October the price reversed after it hit resistance slightly above the 1300 (R3) zone supports our view that gold may be poised to continue trading south within the aforementioned range.
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