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Fundamentals

In Friday's (October 13) Asian session, spot gold fluctuated narrowly and it is currently trading around 1872. The U.S. September CPI data released on Thursday showed that inflation exceeded expectations. The market once again traded policy tightening after the data release. The U.S. dollar index which hit more than two-week lows recently has picked up to above 106.5, and U.S. bond yields also closed higher. Gold fell form highs under pressure following the successive rally in recent day. Yesterday's gold rebound before falling was exactly in line with our expectations, reaching to1885. Investors who enter short positions at that level could gain substantial profits. Next, gold prices may continue to correct, but not by much. The current Palestinian-Israeli conflict is intensifying,and more countries are likely to join it. As the increase in U.S. bond yields can be considered as a rate hike, the Fed is less likely to raise interest rates again within the year. All of these will support the gold price in the medium term. After the short-term fall, it will be the opportunity to go long on the XAUUSD pair.

Data: U.S. September CPI before seasonal adjustments rose 3.7% year-on-year, compared with the expected 3.6% and the previous reading of 3.7%; CPI rose 0.4% after seasonal adjustments, compared with the expected 0.3% and the previous number of 0.6%. Excluding volatile food and energy prices, the U.S. September core CPI rose 4.1% year-on-year, in line with expectations but lower that the previous reading of 4.3%, and the MoM figure was 0.3%, flat with expectations and the previous reading.

Today's focus: preliminary U.S. consumer confidence index for October.

Technical Analysis

Yesterday's surge and fall in gold prices was in line with our expectations as we emphasized investors should go long before the price reaches key resistance levels, and go short with small positions after it rises to the key 1884 level. It was proved that the price rose to as high as 1885 yesterday, the level we advised to enter short positions. Yes, we successfully realized profits. Gold prices' fall after rising is a normal trend as they need to accumulate momentum before breaking through the key resistance level. Looking at the daily chart, the indicators are still bullish. For example, the MACD golden cross has widened. In the 1-hour timeframe, the price broke below the running channel last night. Today, we nee to see whether it can rise to 1875. If the price returns to the channel in the short term, it may break above the previous high. Then we need to focus on the resistance at 1900 and the support in the 1860-1865 area.

It is advised to buy low and sell high during the day. If the XAUUSD pair falls to 1864, you can bet on a rebound and go long with small positions. The stop-loss can be set at 1860, and the first target at 1884 where you can reduce the position size and move the stop loss to breakeven. The second target can be the 1900 level. If it rises to 1899, you can also go short with small positions, with the stop loss set at 1903. To take profits, the first target can be 1884 where you can cut the position size and move the stop loss to breakeven. The second target is at 1870.

Trading Recommendations

Trading direction: Long

Entry price: 1864

Target price: 1894

Stop loss: 1860

Support: 1860.000, 1844.000

Resistance: 1884.000, 1900.000