Long and short information seesaw, where will the gold price go this week?

On Monday (October 4) the U.S. market, gold prices fell slightly in early trading. Although the dollar weakened and India’s gold imports surged again to support gold prices, the uncertainty of the Fed’s tightening policy made gold bulls remain cautious. At the same time, The slightly higher U.S. bond yields during the day pushed gold prices down slightly.

Fed policy risks make bulls afraid to take action, U.S. bond yields increase pressure on gold prices

U.S. Treasury yields rose on Monday. Treasury bond yields can compete with gold, attracting investors who seek safe-haven assets. While the price of gold is falling, the U.S. dollar is also falling. The U.S. dollar is usually the key catalyst for precious metals to be priced in U.S. dollars. According to the Intercontinental Exchange Dollar Index DXY, the U.S. dollar fell 0.3%. A weaker U.S. dollar can lower the price of U.S. dollar-linked assets to overseas buyers; however, some strategists say that rising yields, including inflation-adjusted yields, are creating greater headwinds for gold.

XM senior investment analyst Marios Hadjikyriacos wrote in a report: "As the new week begins, gold prices are under pressure again, and U.S. Treasury yields have rebounded, surpassing the correction of the U.S. dollar." Precious metals that do not provide coupons are more attractive.

The Biden administration and the Democrats are still struggling to reach an agreement on a huge spending bill, while striving to raise the US debt ceiling so that the government can pay the bills after this month. This led to some risk aversion in the market at the beginning of this week's trading. Global stock markets were mixed in overnight trading, but most stock markets were lower. When the New York stock market opened, the U.S. stock index was lower. Risk aversion limits the downside of precious metals and may trigger some bargain-hunting interest before the end of the day.

India's gold imports surge again, limiting the downward pace of gold prices

A government source said that India’s gold imports in September surged 658% from the lower base during the pandemic last year, and local prices were revised to their lowest level in the past six months, prompting jewelers to increase purchases for the upcoming holiday season.

The source said on Monday that India imported 91 tons of gold in September, compared with 12 tons in the same period last year. In terms of monetary value, imports in September surged to US$5.1 billion from US$601 million a year ago. Government officials said India’s gold imports in September surged 170% from the same period last year to 288 tons.

A report pointed out: “Last month, global prices were adjusting and the rupee was also appreciating. The combination of these two factors has drastically lowered local prices and allowed jewelers to hoard gold.

Despite the good news, gold imports fell 0.60% early Monday morning. Although the U.S. dollar index fell by 0.13% on the day, the price of gold is still around $1,750 per ounce. Nevertheless, the US 10-year Treasury bond yield has rebounded to 1.493% (1.91%). Today, such high-yielding safe-haven assets may cause serious damage to precious metals.

Gold prices are in consolidation mode, investors should remain cautious

The current situation of gold is quite complicated. Although the US dollar index is also falling and the yield of the US 10-year Treasury bond is rising, this seems to be pushing the price of gold down.

The daily chart below shows that the intraday resistance that bulls are difficult to overcome is at the level of 1762.2. This node has received market attention as a support or resistance level for many times, and the downward direction is mainly concerned with the support of $1673.3 per ounce.
The price of gold is currently in a clear consolidation mode, and any test or breakthrough of this trend line may be beneficial to the bulls. The fact that the Fed may slow down interest rates or reduce the scale of bond purchases may be a catalyst for raising interest rates, but only time will tell. At the same time, U.S. bond yields are also undergoing adjustments. As the adjustment ends, after the key employment data on Friday is released, the trend of gold prices will become more clear.


(Spot gold daily chart)

At 20:54 on October 4th, GMT+8, spot gold was quoted at $1,756.89 per ounce.