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Gold falls to over two-month low on stronger dollar

· Gold prices hit a more than two-month trough on Thursday, weighed down by a robust dollar, with investors looking to U.S. jobless claims data due later in the day to further gauge the pace of a recovery in the world’s largest economy.

· Spot gold fell 0.3% to $1,858.08 per ounce by 0049 GMT. Prices earlier hit $1,853.32, the lowest level since July 22.

· U.S. gold futures were down 0.3% to $1,862.30.

· The dollar index held firm near a more than eight-week peak against rival currencies, as signs of an economic slowdown in Europe and the U.S. renewed concerns about a second wave of novel coronavirus infections.

· A firmer dollar makes bullion more expensive for holders of other currencies.

· U.S. business activity cooled in September, with gains at factories offset by a retreat at services. Investors now await weekly data, which is expected to show U.S. jobless claims fell slightly but remained elevated.

· Euro zone business growth ground to a halt this month as the service industry slammed into reverse, knocked by a resurgence in Covid-19 cases prompting governments to reintroduce restrictions, a survey showed.

· Federal Reserve officials on Wednesday doubled down on efforts to convince investors they will keep monetary policy easy for years to allow unemployment to fall, emphasizing that interest rates will stay near zero until inflation gets to 2% and stays there.

· Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.87% to 1,267.14 tonnes on Wednesday.

· Gold Price Prediction – Prices Dropped as the Dollar Continues to Gain Traction

Gold prices broke down as the dollar continued to trade higher despite subdued US yields. Stronger than expected US mortgage applications buoy the greenback which paved the way for lower gold prices. The dollar continued to benefit from a safe-haven bid, which has not been the case for gold prices.

Technical analysis

Gold prices broke down on Wednesday and are poised to test trget support is the August lows at 1,862. Resistance is seen near the 10-day moving average at 1,932. The 10-day moving average crossed through the 50-day moving average which means a short-term downtrend is in place. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). Short-term momentum is negative as the fast stochastic recently generated a crossover sell signal. The relative strength index is moving lower reflecting accelerating negative momentum.

Gold Price Predictions

Gold markets broke down during the trading session on Wednesday as we sliced through the $1900 level. This is a very negative turn of events, and therefore it looks like we are going to continue dropping from here. I had talked about this previously, that we could go down towards the $1800 level. That is an area that even more supportive than the $1900 level was, and the fact that we had been making “lower highs” at me a bit concerned for the uptrend.

Ultimately, this is a market that I do not want to start shorting, even though I recognize that the US dollar is very strong at the moment. That being the case, I think that we are eventually going to find plenty of buyers down at the $1800 level as it was a major resistance barrier previously. With this, I like the idea of buying dips down near that area, especially on a daily candlestick that shows promise. Something like a hammer in that general vicinity would be perfect, but right now we need to see whether or not we can find the stability coming back into play. The 200 day EMA sits just below the $1800 level, so it would make quite a bit of sense that we could see quite a bit of interest in this area.

To the upside, if we can break back above the $1900 level, we could make a significant bounce, but right now it does not look very likely to be an easy thing to do without some type of significant supportive movement. We need some type of catalyst, namely the US dollar selling off.

· Silver fell 2.8% to $22.23 per ounce, hitting a more than two-month low earlier in the session.

· Platinum was steady at $838.32 per ounce and palladium eased 0.1% to $2,217.90.

Reference: CNBC, FXEmpire