Since the beginning of November, the price of gold has risen from $1,615 to $1,786 per ounce. One of the reasons for this was good inflation data in the US showing declines greater than expected. Inflation in October was 7.7%, down as much as 0.5% from September. And this trend has continued for four months now.
Such a result automatically changed market expectations for the interest rate hike that the Fed will announce at its December meeting. In the chart attached below, we can see that the inflation data was followed by a sharp change in the probability from 24% to 80% that the FED will consider a 50bp rate hike in December, instead of the 75bp expected so far.
What plans does the FED have for December?
In the past week, statements from some Fed members brought some uncertainty to the December decisions as they maintained their hawkish stance, with the Fed’s Bullard placing the final rate between 5% and 7% which puts the 50bp at the December meeting in doubt. Most instruments started to lose to the dollar. Gold has also been losing for three days and the past week closed $12 lower than it opened on Monday.
Technical analysis of gold
Looking at the daily chart of gold, we notice an inside bar formation from which the price broke the bottom on Thursday, and on Friday the declines continued. Friday’s declines caused a change of direction on the MACD – the oscillator entered a downward phase. If we go back a year and look at the chart of gold in November 2021 we can see that we had a similar set-up to the current one – at that time the change on the MACD signalled the coming declines. The same was true in February, March and August (indicated by the red arrow).
Head and shoulders on the H4 chart
A head-and-shoulders formation – H&S formation – has appeared on the H4 chart. Such formations usually herald a change in trend or a correction. Together with the daily chart analysis described above, this indicates a strong likelihood of a decline in the coming week. It should also be taken into account that from 24 November in the USA there is a “long weekend” in connection with a public holiday – Thanksgiving Day, which will significantly reduce market activity during American sessions.
If my analysis on gold is confirmed, we can expect similar decreases on EURUSD and increases on USDJPY. US10Y bonds already gained on Friday. I will be able to say more about gold and other instruments on Monday, 21.Nov at 10 GMT – during the live session.
LIVE EDUCATION SESSIONS
This NOVEMBER I am pleased to invite you to several online sessions. Below is the schedule of meetings:
The above analysis is based on the PA+MACD strategy, a detailed description of which you can read HERE . I will talk more about the PA+MACD strategy applied to these currency pairs during the live trading sessions which you can attend from Monday to Friday.
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