Current trend

The XAU/USD pair is correcting sideways, trading at 1923.0 dollars per ounce.

The current local upward correction in the gold market is caused not by fundamental factors (a drop in demand for real assets amid global tightening of monetary policy) but by cyclic ones: the instrument has a very high inverse correlation coefficient to the USD Index and bond yields, the decline of which leads to its growth. The yield of the popular 10-year US Treasuries has been weakening since August 21, when it reached 4.330%, and gold quotes renewed their semi-annual low of 1883.0. Today, bonds are at 4.192%, which has led to an increase in gold prices to the current 1923.0.

Investors are taking a wait-and-see attitude after US Federal Reserve Chairman Jerome Powell’s statement at an economic symposium in Jackson Hole about a possible continuation of the “hawkish” rhetoric. However, the Chicago Mercantile Exchange’s (CME) FedWatch Instrument reflects a 78.0% chance of keeping the interest rate at the current level, which means a high probability of further correction in bonds supporting gold quotes.

Investment demand for the asset has increased recently, and the average value, according to CME, reached 210.0K contracts, which exceeds 195.0K a week earlier. The option position is stable and amounts to about 43.0K transactions, which is not enough for a strong movement in the market.

Support and resistance

On the daily chart, the price is trying to exit the local downward channel with dynamic boundaries of 1940.0–1850.0, approaching the resistance line.

Technical indicators are weakening the sell signal: fast EMAs on the Alligator indicator are approaching the signal line, narrowing the range of fluctuations, and the AO histogram is forming rising bars below the transition level.

Resistance levels: 1940.0, 1980.0.

Support levels: 1900.0, 1855.0.

Trading tips

Long positions may be opened after the price rises and consolidates above 1940.0 with the target at 1980.0. Stop loss – 1920.0. Implementation period: 7 days or more.

Short positions may be opened after the price drops and consolidates below 1900.0 with the target at 1855.0. Stop loss – 1920.0.