Gold: overreaction
It was a turbulent week on financial markets coming from FOMC meeting minutes and the collapse of one of the largest Chinese real estate companies, Evergrande. FOMC meeting minutes revealed the possibility for interest rates in the US to reach even higher levels from currently estimated, and also noted by Fed Chair Powell as two more rate hikes till the end of this year, out of which, one already occurred. Although equity markets reacted negatively to this news, USD gained on expectation of higher interest rates in the coming period as well as US Treasury yields. Gold lost the ground during the previous week, tumbling down till the level of $1.885. During this time, xauusd overreacted and lost some of the correlations with USD. The USD was higher by 0.6% during the week, while gold was down by almost 1.3%.
The price of gold reached levels from March this year. RSI reached level of 30, which might be treated as the level of oversold market. This is also an indication of a potential for a short term reversal in the coming period. Moving average of 50 days continues with its convergence toward MA200, indicating potential for a cross in the coming period.
After reaching the support line at $1.900 and clear oversold side, there is increased probability for a short term reversal. Gold should get back into balance with USD and follow the negative correlation, after it has been lost during the previous week due to market overreaction. A move to the upside might be up to the level of $1.930, eventually $1.950, but not higher from this level.
Important news to watch during the week ahead are:
USD: Jackson Hole Symposium, Durable Goods Orders for July, Michigan Consumer Sentiment Final for August. Fed Chair Powell Speech
The price of gold reached levels from March this year. RSI reached level of 30, which might be treated as the level of oversold market. This is also an indication of a potential for a short term reversal in the coming period. Moving average of 50 days continues with its convergence toward MA200, indicating potential for a cross in the coming period.
After reaching the support line at $1.900 and clear oversold side, there is increased probability for a short term reversal. Gold should get back into balance with USD and follow the negative correlation, after it has been lost during the previous week due to market overreaction. A move to the upside might be up to the level of $1.930, eventually $1.950, but not higher from this level.
Important news to watch during the week ahead are:
USD: Jackson Hole Symposium, Durable Goods Orders for July, Michigan Consumer Sentiment Final for August. Fed Chair Powell Speech
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