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Asset Watch
Tuesday, October 3, 2023
The US Dollar Index (DXY) recently reached its highest level in nearly a year, primarily driven by signals from the Federal Reserve indicating the necessity of another rate hike within this year. Furthermore, the Fed’s inclination to maintain higher interest rates for an extended period contributed to this surge. Consequently, this upward momentum in the US dollar had a detrimental effect on the price of gold, prompting a sell-off that caused gold to lose almost 5% of its value in just one week.
Additionally, gold prices were impacted by the upward movement in the US 10-year yield, which rose to its highest point in nearly 15 years. This surge is significant, as there exists a negative correlation between gold prices and the 10-year yield. The rise in the yield acted as a further catalyst for the sell-off in gold. Moreover, the 10-year yields were positively influenced by the avoidance of a US government shutdown. Such an event could have had adverse effects on the US economy, particularly in terms of reduced spending and consumption.
Chart source ADSS Platform
On September 27, the gold broke the August 21 low at 1884 and retreated showing that bears were in charge. Today, the price printed a muti-month low at $1815/oz then rebounded showing that some traders were taking profits. Therefore, a daily close above 1831 reflects a weaker bearish momentum and may embolden bulls to rally the price towards 1872. That said, the resistance level located at 1855 should be kept in focus.
On the other hand, a daily close below 1802 signals a stronger bearish momentum as they may press towards 1765. Nonetheless, the support area located between 1789-1780 should be watched closely.
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