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Gold Price Outlook Caught Between US Dollar and Energy Gains, Where to From Here?

Gold Price Outlook Caught Between US Dollar and Energy Gains, Where to From Here?

Daniel McCarthy, Strategist

GOLD, XAU/USD, US DOLLAR, CRUDE OIL - Talking Points

  • Gold prices have consolidated amid commodity mayhem this week
  • Energy and USD movement has held the upper hand over gold for now
  • External factors are impacting XAU/USD.Will gold glisten again?
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Gold prices have consolidated within a range this week and the yellow metal has been sidelined as energy commodities roared and inflation fears fueled the US Dollar higher.

Energy commodities have been dominating market attention as supply constraints have been unable to keep up with demand going into the northern hemisphere winter. Sky-high prices seen in this sector have spilt over into some commodities outside of energy, but not so much for gold at this juncture.

In some corners, stagflation is emerging as a looming threat to growth prospects. Other market participants are getting jittery over the prolonged nature of transitory inflation. This is due to the input that higher energy costs have on the consumer price pipeline. In either scenario, this has led to US Dollar buying as global risks mount up for markets.

Higher commodities and a simultaneous higher USD appear to have cancelled eachother out for the gold price. A dislocation in either of these markets might be a catalyst for the next move in gold.

The chart below illustrates energy proxied by Brent crude oil and the US Dollar represented by the DXY USD index.

GOLD AGAINST CRUDE OIL AND USD

GOLD OIL USD CHART

Chart created in TradingView

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GOLD TECHNICAL ANALYSIS

The price of gold started the week breaking up through a descending trend line and has traded at a 1745-1770 range since. This has seen the 21-day simple moving average SMA descend into the range window and could offer short-term resistance.

The 21-day and 55-day SMAs have a negative gradient and the spot price is below both SMAs. This might indicate bearish momentum. A move above these SMAs may see negative momentum stall.

The 21-day SMA based Bollinger Band was touched twice last week and as the price moved back inside the bands, volatility moved lower, as indicated by the width of the bands narrowing. This could suggest a consolidation period and price action possibly remaining rangebound.

On the downside, levels of potential support may lie at the pivot point of 1745 or at the previous lows of 1721 and 1681. Above the market, potential resistance might be offered at the previous highs of 1771, 1787 or 1834.

GOLD CHART

Chart created in TradingView

--- Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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