Title : Gold Price Forecast: XAU/USD eyes smoother road to the south of $1,700 – Confluence Detector

OCT 11, 2022 01:38 AM ET

By:AnalysisWatch

Gold prices (XAU/USD) continue to retreat for the fourth consecutive day as bears prepare for the new annual bottom around a one-week low.

That said, the latest weakness in the yellow metal could be related to U.S. dollar strength, supported by multi-year high Treasury yields and Fed bets. It is worth noting that fears of an economic slowdown and recent mixed statements from the Fed failed to dampen the Greenback Bulls, as markets discounted 75 basis points (bps) of a Fed rate hike during November.

Worrying comments from the World Bank (WB) and International Monetary Fund (IMF) combined with the recent conflict between Russia and Ukraine to amplify the risk-averse mood and steer traders towards the US dollar, weighing on XAU/USD prices.

As risk aversion joins Fed bets weighing on gold, bearish traders can keep the reins tight ahead of the Federal Open Market Committee (FOMC) meeting minutes and September US consumer price index (CPI) data due for release on Wednesday and Thursday, respectively.

The Technical Confluence Detector shows gold prices hovering above the key support at $1,661, which comprises the 38.2% Fibonacci in monthly terms and the pivot point for the one-week S1. The rising strength of the $1,661 support is the lower hourly Bollinger band and the previous 4H low.

Note that there is a wide gap south of $1,661 unless it touches a small bump near the $1,644 level, which includes the 23.6% Fibonacci on the monthly and the one-day S2 pivot point.

Meanwhile, the average hourly Bollinger band near $1,670 keeps an eye on the immediate upside in XAU/USD.

Next, the previous yearly low near $1,678 appears to be the last defense for gold bears.

If the price crosses the $1,678 barrier, a rise towards the $1,700 threshold cannot be ruled out.