Gold spikes after digital woes
Gold has faced headwinds this year due to tightening from the Federal Reserve, higher interest rates and a stronger USD. The gold price rallied in Q1 2022 following Russia’s invasion of Ukraine but has since dropped about 20 per cent through the beginning of November.
Recently, it looked like gold had benefited from volatility in the cryptocurrency markets. One of the largest crypto exchanges, FTX, has faced a surge in customer withdrawals. Consequently, a liquidity crunch has reached a rescue deal with the rival exchange Binance. In this environment, many cryptocurrencies have sold off heavily, and gold could be considered a relatively safe haven. At the same time, the US dollar has reached a pause in its almost parabolic rise so far this year, meaning possibly less headwind for the precious metal.
From a technical perspective, the gold price has bounced off the weekly MA 200, which has earlier (2018) served as a support before the famous Powell pivot.
Gold price (USD per ounce), daily 12-month price chart
In the short term, it is essential to keep an eye on this week’s US CPI statistics on Thursday, 10 November. In a pessimistic scenario where interest rates spike again, the gold price could drop back to the year’s lows of around USD 1630 per troy ounce. In the daily one-year chart, a positive divergence in the MACD indicates a reasonably strong support level. On the other hand, a breakout above USD 1720 would be a good signal.
Gold (USD per ounce), daily 12-month price chart
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The full name for abbreviations used in the previous text:
EMA 9: 9-day exponential moving average
Fibonacci: There are several Fibonacci lines used in technical analysis. Fibonacci numbers are a sequence of numbers in which each successive number is the sum of the two previous numbers.
MA20: 20-day moving average
MA50: 50-day moving average
MA100: 100-day moving average
MA200: 200-day moving average
MACD: Moving average convergence divergence
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