Technical Analysis

Dollar lower….Gold higher. The precious metal moves above a downward sloping trend line

Gold moved back above its downward sloping trendline

The price of spot gold has moved up 5 last 6 trading days (the one down day was just by $1or $2). The move to the upside took the price from the low on September 28 at $1614.92. The high price today has reached $1729.46. That’s a 6.7% gain over those 6 trading days.

Looking at the daily chart above, the price over the last 3 days has been able to extend back above what was a floor swing area between $1653 and $1690 (see yellow area in the chart above). The price today has also moved above a downward sloping trendline. That trendline cuts across at $1717.98. Bullish.

The last corrective high from September 13 at $1735.10 is the next upside target. Above that and traders will start to target the $1753.10 swing level (see green numbered circles), followed by the falling 100 day moving average at $1762.99 (call it $1763). The last time the price traded above its 100 day moving average was back on May 22. The moving average was up at $1884 at that time.

The 38.2% retracement of the move down from the 2022 high reached in the beginning of March cuts across at $1789, and would be another target that would be needed to increase the bullish bias. The 38.2% retracement is the minimum retracement target that would give traders confidence that the correction is more than a plain-vanila variety.

IN summary, buyers are trying to take more control in gold above the downward sloping trendline, but they have work to do on the daily chart to get out of what has been a bearish trend since the price peaked in March and near the swing high from August 2021. Get above the 38.2% retracement would give buyers more confidence at the bottom is in place.

What about the USD index?

Helping the gold move to the upside has been the declining US dollar . I would think that gold would need more downside momentum in the USD to keep the price of gold moving higher.

Looking at the dollar index (DXY) 4-hour chart below, the price today has dipped back below its 200 bar moving average on the 4 hour chart at 110.199. The current price trades at 110.08. Bearish tilt.

Of note is that back on September 13, the DXY bounced off that 200 bar MA line and later based at the 100 bar MA on September 19 before racing to the upside. Today’s break below the 200 bar MA is the first since August 18.

Getting and staying below the 200 bar moving average on the 4-hour chart increases the bearish bias for the DXY which should also support the price of gold.It would take a move back above the 200 bar MA (at 110.19( and the 100 bar MA (at 111.33), to spoil the bearish party for the DXY on the 4-hour chart.

The next target for the DXY would be the 50% midpoint of the move up from the August low. That level comes in at 109.705. An upward sloping trendline is also near that retracement level increasing the levels importance. Breaking below 109.70 would be another bearish tilt.

The DXY index is back below the 200 bar MA on 4-hour chart

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