Daily Market Recap - Gold

Gold is tumbling on Wednesday triggered by a steep rise in the US Dollar following Chicago Federal Reserve President Charles Evans comments suggesting the central bank may raise US rates earlier than expected.

The rising greenback value has placed the precious metal under immense pressure since the start of the week. Gold fell nearly 100$ over the last three sessions, trading down to 1,865.67 per ounce at the time of writing.

Fed President Evans announcement came during the virtual Official Monetary and Financial Institutions Forum in which he said that the US economy has returned to 90 percent of its pre-pandemic level and lowered expectations on further quantitative easing, providing a strong signal to Dollar bulls.

That said, Evans also mentioned that the US economy risks a longer and slower recovery should the government fail to agree on another fiscal stimulus package. Globally, however, the announcement came as a positive surprise given that Evans is typically viewed as one of the more dovish members of the Fed.

From a technical perspective, the main trend is down on the daily chart. Prices broke firmly below the August high trendline and are now testing the crucial 1,863.27 August low mark, effectively completing a full reversal. Sellers appear to have enough resolve to touch below the immediate support in the coming sessions but by doing so may entice buying pressure to return as the RSI will likely flash into oversold territory.

The next significant level to watch out for should price continue to slide will be the 1,817.58 zones which proved to be the last major hurdle before the late July surge. On the flip side, the 1,900 psychological resistance should provide the first test of any reversal at this point.

(Chart Source: Tradingview 23.09.2020)

Considering the overall economic climate, I would still argue the fundamentals in gold remain strong, particularly as a COVID-19 vaccine is yet to be discovered and parts of the world are going back into lockdown mode. Nonetheless, the US Dollar is running hot and buyers will likely have to wait until prices are closer to 1,800 to make a strong comeback.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.