Spot gold (XAU/USD) prices broke below a key area of support in recent trade, tumbling beneath both the 200 and 50-day moving averages, both of which sit close to $1790. As of right now, prices have recovered a little and XAU/USD is trading around $1790, meaning prices are down about 0.8% on the day. This follows Monday’s steep 2.2% decline and means dollar-denominated gold has lost nearly $60 in value so far this week.

Traders will remember that the bulk of the decline was triggered on Tuesday as markets reacted hawkishly to the news of Jerome Powell’s renomination as Chairman of the Fed for a second term. The hawkish reaction was a result of market participants unwinding bets that Lael Brainard would be announced as the new Chair, potentially heralding in a more dovish policy lean. As it happened, Lael Brainard was picked as the new Vice Chair of the Fed, and will replace Richard Clarida in the role in February.

BULLISH AND BEARISH CONDITIONS/ POSSIBILITIES :

In terms of what's next for gold, the focus is firmly on the December Fed meeting and any indications that recent chatter amongst Fed officials about accelerating the pace of QE taper in January translates into a broader consensus. Any decision to accelerate QE tapering would likely accelerate the recent upside seen in real yields, which would be bad for precious metals. In the meantime, as long as the dollar remains bid and yields buoyant, gold will remain suppressed, with the bears perhaps targetting support at the $1760 area to the downside. 

GOLD on a Bearish Breakout

Nov 23 2021