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Fundamentals

During Friday's (October 20th) Asian session, spot gold oscillated and it is now trading at 1975. Yesterday, the performance of gold was in line with our expectations, as the area between 1947 and 1953 would become support if gold climbs above there. Then, gold reached this range and surged to 1983. Besides, there is evidence to support gold prices.  On the one hand, the Middle East conflict has further signs of escalation. On the other hand, Fed Chairman Powell's speech implied that the pause in interest rate hikes would last longer, which boosted gold prices. We have also emphasized before, that if the war continues, the gold price will rise to 2000 later, and investors should keep a bullish view to go long. Now, the gold price stands in the key position, and investors must stay careful when chasing the rise, as gold has grown by 170 dollars from 1810 to 1983 in half a month. Such a huge increase should have priced in the future escalation of the war. Moreover, the gold has also reached the initial expectations, and the space above should not be overly expected. Thus, aggressive investors could still go long after a retracement, while currently, going short at highs should offer better profits.

Data: the U.S. initial jobless claims were 198,000 last week, while the expected number was 212,000 and the previous number was revised from 200,900 to 211,000. As of the week of October 7th, the weekly number of continuing jobless claims was 1.734 million people, while the expected number was 1.71 million people, and the previous number was revised from 1.702 million to 1.705. Along with the further deterioration of homebuyers' affordability, U.S. home sales in September were annualized at 3.96 million, falling to a new low since 2010. The median selling price of a home in September rose 2.8% YoY, the highest September on record.

News: Fed Chairman Jerome Powell said inflation remains too high, the road to fighting inflation may be bumpy and take some time, and that the Fed is committed to bringing inflation down to 2% on a sustainable basis. To achieve this goal, it may take a period of below-trend economic growth, as well as further weakness in labor market conditions. In addition, Powell noted that rising yields in the bond market may mean that more rate hikes are not necessary.

Today's Focus: No important data, focusing on situations in the Middle East.

Technical Analysis

Gold went stronger unilaterally yesterday, and it oscillated near 1850 after the Asian session started. Moreover, gold stayed in the range from 1947 to 1953 basically and finally surged strongly to 1983 in the U.S. and Europe Sessions. At present, gold faces a multiple-resistance area from 1983 to 1988, and it is impossible for it to cross through this area until the emergence of great news. Especially, when looking at the psychological level at 2000, gold may plunge further if the middle-east conflict improves. Therefore, investors should consider the situation in the range from 1983 to 1988 technically, and aggressive investors should go short with small positions. It is vital to stop going long now but wait for a significant retracement. Investors should watch but not trade unless a tremendous retracement appears.  

Trading Recommendations: Buy low and sell high. If gold retraces to 1953 today, investors could go long with small positions, and set the stop-loss at 1948. To take profits, the first target will be at 1965, where they can reduce the position size and move the stop-loss to breakeven, and the second target can be fixed at 1983. Nevertheless, if gold surges to 1983, investors could go short with small positions, and set the stop-loss at 1988. To take profits, the first target will be at 1965, where they can reduce the position size and move the stop-loss to breakeven, and the second target can be fixed at 1953.

Trading Recommendations

Trading direction: Short

Entry price: 1983

Target price: 1953

Stop loss: 1988

Support: 1965.000/1953.000

Resistance: 1983.000/1988.000