Gold prices in terms of the US dollar (XAU/USD) fell for the third straight session on Friday and booked the second weekly loss in a row last week, as renewed Dec Fed rate hike bets kept the non-interest bearing gold prices under pressure. The bullion completely ignored weak data sets from the US and dropped to three-week lows at 1139.14, before recovering to 1142.10 at close. The Fed’s favourite inflation gauge, Core PCE index came in at 0.1% versus 0.2% expected. While personal spending numbers also missed forecasts (0.1% vs. 0.2% exp.). However, the prices failed to resist horizontal 50-DMA support and tested the 100-DMA placed near 1139 region, having found fresh bids near the last.
Gold prices extended last week’s bearish bias and hit fresh multi-week lows at 1137 levels in the Asian trading today, finally breaking below 100-DMA now at 1138.77. However, the prices managed to recover lost ground somewhat and edged higher near 1143 during early European hours, after the mixed set of Chinese manufacturing PMIs spooked markets and boosted the safe-haven bids for gold. The latest survey from Caixin on Monday showed that China’s PMI stood at 48.3 in October, beating forecasts for a reading of 47.60, although remains in contraction. The ongoing contraction in factory activity is consistent with other indicators which point to sustained weakness in economic production and therefore, reinforced China slowdown worries. Later in the day, markets await the US ISM manufacturing PMI report to provide fresh cues on the USD moves. The US manufacturing sector activity is expected to deteriorate to 50.0 in Oct from 50.2 reading booked in Sept.
Technicals – Struggles to extend beyond 50-DMA
On daily charts, the prices failed to sustain at higher levels and fell back below 50-DMA at 1140.50 and now looks to retest the resistance-turned support at 100-DMA. The pair has formed a small spinning and remains supported above the key Fib 61.80% retracement (Oct 2-15 rally) located at 1138.06. The daily RSI is seen rebounding slightly near 42 levels, and suggest a minor recovery to extend in the day ahead. Hence, to the upside, the prices could retest daily highs at 1143.08, above which Fib 50% (of the same rally) support-turned resistance would be reached. However, the prices would face stiff barrier around 1150-1150.80 levels, the confluence zone of the key psychological levels and bearish 5-DMA.
Should the US data beat expectations; the USD bulls will jump back in the bids and cap the recovery in gold prices, driving them to the immediate support located at the above-mentioned Fib 61.80% level, below which fresh monthly lows near 1135-1130 could be exposed. The bullion remains supported so long as it holds above the key Fib 61.80% support.