Gold’s November Head-Fake Puts Pressure on Longer Term Outlook

  • XAUUSD
    (${instrument.percentChange}%)


Past Performance: Past Performance is not an indicator of future results.

The blue vertical is the beginning of November. The precious metal started the month poorly. By the 3rd of November, gold was down about 1.3% (month open to low). However, it charted a reference trough, and almost 48 hours later, it charted the required reference peak.

With these two points as an anchor, the precious metal charted a series of higher troughs followed by higher peaks - gold was trending up for the month. The uptrend also had underlying momentum. The slow stochastic spent a considerable amount of time in its upper quartile (blue rectangle), from the 4th- to the 16th-November.

From the month low to high, gold appreciated close to 6.7%. However, the 16th November is the zenith for the month, marked by HP* and the dashed red vertical. The precious metal then sells down and charts a lower trough (LT*), which effectively ended its uptrend. However, it is not until 18 November that weakness begins to emerge, and gold charts a lower peak. A downtrend commences on the 19th when a lower trough is charted, following its previous lower peak. This is followed by another lower peak (LP2) and another lower trough (LT3).

The stochastic has also fallen into the lower quartile (red rectangle). This suggests capitulation. The longer the stochastic remains in this area, the greater the likelihood for further price declines. Moreover, with only a week left in November; the monthly chart may be a cause of concern after gold's exhaustion.


Past Performance: Past Performance is not an indicator of future results.

The XAUUSD monthly charted a lower peak followed by a lower trough. Further weakness was evident when another lower peak (LP2) was charted. However, the precious metal found support and the next leg down did not trend lower. The higher trough (HT) suggested support - but this is now be questioned. Gold's November head-fake has effectively charted the next lower peak (LP3). If the price drops below the red horizontal, gold will be in a downtrend.

Of note, it is Fed Chair Powell's nomination for a second term that has pressured XAUUSD. Hedged gold positions, opened to take advantage of a potential dovish Brainard nomination, are now being unwound. Thus, the support for gold may be diminishing fast on the longer-term chart. The implication here is that the precious metal runs the risk of further declines, as the Fed progresses with its tightening policies. If so, higher yields will impose an opportunity cost for holding gold. This is likley to push gold lower if it is abandoned in favour of less "costly" assets.

Russell Shor

Senior Market Specialist

Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.

Trade the News: View our Economic Calendar

Published

Daily Market Snapshot

Most Popular Shares AU Shares Forex Stock Baskets Forex Baskets Cryptocurrencies Indices Commodities

Most Popular

Shares

AU Shares

Forex

Baskets

Baskets

Cryptocurrencies

Indices

Commodities

Most Popular

Shares

AU Shares

Forex

Stock Baskets

Forex Baskets

Cryptocurrencies

Indices

Commodities

Most Popular

Shares

AU Shares

Forex

Stock Baskets

Forex Baskets

Cryptocurrencies

Indices

Commodities

Symbol Bid Ask Spread Change
${instrument.name} ${instrument.name} ${instrument.bid} ${instrument.ask} ${ instrument.spread | formatSpread } ${instrument.percentChange}%

Last Updated: ${lastUpdated}

Disclosure

Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.

Spreads Widget: When static spreads are displayed, the figures reflect a time-stamped snapshot as of when the market closes. Spreads are variable and are subject to delay. Single Share prices are subject to a 15 minute delay. The spread figures are for informational purposes only. FXCM is not liable for errors, omissions or delays, or for actions relying on this information.

Risk Warning: Our service includes products that are traded on margin and carry a risk of losses in excess of your deposited funds. The products may not be suitable for all investors. Please ensure that you fully understand the risks involved.

${getInstrumentData.name} / ${getInstrumentData.ticker} /

Exchange: ${getInstrumentData.exchange}

${getInstrumentData.bid} ${getInstrumentData.divCcy} ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%) ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%)