Source: PaxForex Premium Analytics Portal, Fundamental Insight
German Industrial Production for August decreased by 0.2% monthly and 1.8% annualized. Forex traders can compare this to German Industrial Production for July, which dropped by 0.6% monthly and 2.0% annualized.
Eurozone Sentix Investor Confidence for October is predicted at -24.0. Forex traders can compare this to Eurozone Sentix Investor Confidence for September, reported at -21.5.
Gold experienced a massive sell-off over the past three weeks as traders priced in the potential of another 25 basis point interest increase by the US Federal Reserve before keeping interest rates higher for longer. They discounted the global slowdown, a rise in inflationary pressures, and geopolitical risks. The Saturday attack by Hamas on Israel brought geopolitical risks to the forefront. Oil prices shot higher, and gold followed suit, breaking bearish technical patterns. The initial upside move is a knee-jerk reaction by traders, but many unknown factors remain, which will pressure prices for gold higher.
Even without the Hamas attack on Israel, the global economy was slowing, which makes gold an attractive portfolio hedge. A strong US Dollar has an inverse impact on commodities, as most are settled in US Dollars, but this relationship breaks down when fear and uncertainties take over. The recent sell-off in gold presented traders with an opportunity to load up on this precious metal, as the next few months could provide negative surprises across multiple categories, including inflation, global economic output, and rising commodity prices.
One risk that most market participants ignore is stagflation, which could last years. It refers to a stagnant economy with high inflation and high interest rates. It presents the perfect storm for depressed performance across the economy but provides a catalyst for safe-haven assets like gold, which may have set the lows for the next 52-week period.
The forecast for the XAU/USD remains bullish after this precious metal rebounded off its horizontal support area. Volatility could remain high, with the Kijun-sen and the Tenkan-sen moving lower as bullish momentum rises. The Ichimoku Kinko Hyo Cloud shows the Senkou Span A and Senkou Span B moving lower but at a measured pace. Traders should monitor the CCI following its breakout from oversold territory. This technical indicator has plenty of upside momentum, and a move above zero could provide bulls more fuel for a reversal rally. Can bulls maintain control over the XAU/USD and pressure price action into its horizontal resistance area? Subscribe to the PaxForex Daily Fundamental Analysis and earn over 5,000 pips per month.
Should price action for XAU/USD remain inside the or breakout above the 1,843.60 to 1,855.20 zone, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 1,850.50
- Take Profit Zone: 1,910.25 – 1,937.00
- Stop Loss Level: 1,804.00
Should price action for XAU/USD breakdown below 1,843.60, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 1,804.00
- Take Profit Zone: 1,722.00 – 1,739.55
- Stop Loss Level: 1,843.60
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