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Abstract: Gold prices are trading in a narrow range in a subdued market as the direction remains elusive, pressured by the 89-day SMA. Despite the positive short-term momentum, the medium-term trend remains at risk of a pullback.

Fundamentals

Before the New York session on Tuesday, the price of gold rose slightly. Today, the precious metals market is supported by moderate external markets, including the weakening of the U.S. Dollar Index (USDX) and the rise of crude oil prices, but trading remains sluggish before the important meeting of the Federal Open Market Committee.

As the market expects the Fed to keep its monetary policy unchanged after Wednesday's meeting, the price of gold has recently resumed its upward trend. After the bulls found interest in buying near the key 200-day SMA, the price of gold was at a two-week high of about US$1,935. At the same time, the price of gold has risen above the 20-day and 50-day SMAs, indicating that the short-term trend has turned bullish.

However, it is still difficult for the market to ponder whether the short-term rise can turn into a reversal momentum. As the Fed has repeatedly warned, the strong economic data in the U.S. has aroused people's concerns about the long-term high-interest rate, which prompted the gold price to fall back to the psychological threshold of US$1,900 earlier.

The question now facing the market is whether the Fed is willing to admit (as we heard from the European Central Bank (ECB) last week) that the interest rate hike cycle may have ended, or whether it will continue to insist that it may raise interest rates again. Bitmap will be the key, but the market will continue to pay attention to Powell's every word. If the Fed's tone is tough again, there may be a risk that gold prices will return to the threshold of US$1,900 again.

Technical Analysis

In the past few trading days, the price of gold has fluctuated upward in stages and rebounded strongly from the previous decline below the 200-day SMA (US$1,901). Currently, short-term oscillators suggest that the bullish forces are not completely over as prices are testing an important trendline connecting the recent lower highs.

If buying interest persists, bulls may try to break through the psychological threshold of US$1,940 and then test the recent peak of US$1,945; If bulls' interest increases, the price may rise to the peak of US$1,958 in February. However, the last line of defense for bears at US$1,966 will limit further price rallies. Otherwise, the medium-term bearish trend will be broken.

Alternatively, if gold extends its move lower at current levels (US$1,935), the recent support at US$1,919 will be the first line of defense. A break below this level would set the stage for further declines towards the June low of 1,892. The bearish trend would then continue until new lows.

Overall, the bulls are currently heading towards a congestion zone, which includes restrictive areas and psychological thresholds. Going forward, a clear break of the bull/bear watershed at US$1,966 is needed to determine its medium-term direction, otherwise, continued bullishness is not favored. It is recommended to go short at the highs.

Trading Recommendations

Trading direction: Short

Entry price: 1940

Target price: 1884

Stop loss: 1966

Deadline: 2023-10-03 23:55:00

Support: 1930, 1923, 1919

Resistance: 1945, 1958, 1966