A move below $1,450 could trigger another wave of selling
The $1,450 level is a crucial support point for gold and a move below it could open the floodgates to more selling, said McKay.
"We saw a lot of longs entering the $1,425-$1,450 region. Right now, we are on the brink of potentially another wave of downside here if risk markets keep up," he said. "The average position sizing per trader has been well above average and what we are seeing is a shakeout of that length and some shorts being added onto the downside momentum. Looking at towards next week, we are more biased to say range-bound to slightly lower."
The $1,450 level is a significant support zone for gold, which is likely to trade in the $1,450-$1,500 range in the short-term, added Butler.
"When we first got above $1,450 this summer, it was a significant line of resistance on the way up. On the way down, it will also be a significant level of support," he said.
But, a move below $1,450 could trigger a drop towards $1,400 for the yellow metal, Butler highlighted. "Whether we get this low will depend on the macro outlook," he said.
Eyes on inflation, retail next week
Key data next week include U.S. inflation figures on Wednesday, PPI data on Thursday, as well as retail sales, New York Empire State Manufacturing Index, and industrial production on Friday.
Inflation will be one of the more important reports considering the Fed's latest comments that it won't consider raising rates until inflation "significantly" improves.
"We are expecting core inflation to be broadly unchanged. There has been a bit of acceleration over the past few months, but no sign that we'll see a significant rise as far as the Fed is concerned. Generally, the inflation picture is benign," Capital Economics U.S. economist Andrew Hunter told Kitco News.
It is looking increasingly unlikely that the Fed will cut rates in December, but another cut is not entirely out of the picture for 2020, Hunter added.
"There is a slightly bigger chance that the Fed will have to cut once more at some point. GDP growth will slow a bit in Q4 and remain weak next year. Fed could be convinced to provide a bit more loosening. In big-picture terms, they seem comfortable with the idea that they have done enough," he said.
Reference: Kitco
Read More: https://www.kitco.com/
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