On October 6, Monday, we noted that the weaker-than-expected U.S. nonfarm payrolls data had essentially ruled out an October rate hike, yet markets still held a strong expectation for a December rate increase, keeping the dollar firm and weighing on gold prices. Short-term technicals also showed sellers in control, with weak rebound signals, so we advised watching resistance at $4,200 and then $4,235, with support at $4,124 and then $4,100.
Looking at the subsequent price action, during Monday's European session gold rebounded to $4,168 before stalling and drifting lower. After the U.S. open, selling pressure intensified and prices fell to a low of $4,123 before stabilizing. On Tuesday's open, gold rebounded to $4,152, met resistance, fell to $4,105 and stabilized, hitting a two-month low before rebounding to $4,158, where it again stalled; it is currently trading near $4,151.
Overall, gold's short-term rebound came in slightly weaker than expected, and after failing on rallies it stabilized in turn at the $4,124 and $4,100 support levels we identified, broadly in line with our expectations. According to a Wolfinance star analyst, market expectations for further Federal Reserve tightening are the main factor currently suppressing gold prices. The Fed raised rates by 25 basis points in September, the dot plot showed one more hike this year, and hawkish comments from Fed officials briefly fueled sharp increases in October and December rate-hike expectations, supporting the dollar and Treasury yields while pressuring gold, which hit a near two-month low last week.
Afterward, however, the Fed Vice Chair and a Governor struck a more dovish tone, saying there was no urgent need to hike for now, and gold stopped falling and stabilized. With U.S. PCE data and nonfarm payrolls both missing expectations, the market essentially ruled out an October hike, and gold briefly rebounded to a fresh one-week high before quickly stalling. Expectations for a December hike did not fade significantly on the payrolls data, and trading continues to price in a Fed move in December, which has supported the dollar's rise to a fresh high since last April and directly pressured gold.
On the daily chart, after stabilizing last week gold's rebound has been relatively weak, and it remains in low-level consolidation above $4,100. For downside support, watch the $4,100 round number, which is also near the intraday low; over the past week gold has stabilized there and traded in a range, and a break below would increase short-term downside risk, with the next area of interest at the $4,000 round number.
For upside resistance, watch Monday's high of $4,170, where gold repeatedly stalled on rebounds that day, followed by the $4,200 round number and the $4,235 level, which was the low over the past month or so before last week's breakdown. The 5-day moving average's death cross is easing slightly, the MACD's death cross is also easing slightly, and the KDJ and RSI death crosses have edged up a little, though all remain in weak territory; short-term technicals show sellers hold the advantage and the rebound signals are relatively weak.
Intraday reference for gold: Although U.S. nonfarm payrolls came in below expectations, the market still holds high hopes for a Fed rate hike in December, which supports a strong dollar and directly pressures gold prices. In terms of trading, a range-bound approach is suggested, with downside support at $4,100; if gold holds above this level, a short-term rebound remains possible, while upside resistance can be watched at $4,170, then $4,200 and $4,235. A break below $4,100 would increase short-term downside risk, with the next area of interest at $4,000.