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November 23, 2021

XAU/USD Deep Dive: Completing The Bullish Flag?

Bart Kurek

Check out my previous Gold deep dive from early October here to see how we have progressed...

Technical Outlook:

There is an overall bullish flag pattern trend on Gold, as we saw an impulsive move from 1450 to 2075 between March and August 2020. Ever since hitting the all-time high (ATH), price has fallen into a descending channel hitting as low as 1675 three times. In May 2021, we saw a potential move back to ATH's but this was unsuccessful as price did re-enter the channel. Now, we are seeing price reach these recent highs around 1900, suggesting could be on it's way to try to successfully break through recent highs and back to ATH's above 2000+.

Looking at recent moves over the past couple of weeks, you can see price has been breaking through every short-term and long-term key horizontal level. 1765 acted as clear resistance, once broken became new support. 1800 is currently being retested as new support, just like 1765 it was clear resistance. Look out for how price reacts to this level, a break lower could suggest further bearish moves to happen and opens up price to 1765. If price rejects and pusher higher, this level is confirmed as clear support and a bullish move towards 1835 is likely.

Retail Sentiment:

Looking at retail sentiment, most traders are actually long on this pair with the majority being 74% long. This means that traders are actually looking to catch the move I just described above. Traders who trade against this concept (against retail traders) could actually see a bearish move more likely now, as institutions will likely be pushing price towards liquidity voids where traders going long will have their stop losses.

Upcoming News:

Over the next week and a half, we have many USD economic data coming out. The quarterly GDP rate is coming out expected at a 0.2% uptick from 2.0% to 2.2%. We have the PCE Price Index expecting a 0.2% uptick, and alongside these we have a couple "smaller" macroeconomic data releasing including personal income and spending figures.

Most importantly though, we're having the FOMC Meeting Minutes where we will get clues on when they plan on hiking interest rates. Recall that the Fed has already started to taper asset purchases confirming they are en route towards tightening possibly by mid-2022. However, in the recent dot plot forecast, it was indicated that half of the committee were not so eager about hiking next year yet.

Fundamental Outlooks:

Bearish Gold:

  • Hawkish Fed's comments to dampen gold
  • Dovish to hawkish Fed is bearish for gold
  • Tapering has begun
  • Gold will struggle until Fed's tightening cycle is underway
  • Increase in interest rates to push gold prices lower
  • Good NFP report is bad for gold
  • Hawkish Fed's statement is negative for gold
  • Increasing bond yields is bad for gold

Bullish Gold:

  • High inflation causes gold inquisition
  • Biden signs bill to revive infrastructure and gold
  • Metals usually bullish around end of year
  • Fed admits failure on price stability
  • Gold to shine as a safe-haven asset amid the Evergrande crisis

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