The bullion fell 0.3% Monday, dropping toward the critical 1,830 USD support zone, where the previous massive resistance zone used to be. Bulls need to defend this area for gold to stay in an uptrend.
Fed getting more hawkish
Last week, the Fed’s Governor Christopher Waller called for an accelerated QE taper and said that rate increases could be appropriate as soon as Q2 2022. Shortly after that, influential **Vice Chairman of the FOMC Richard Clarida said it could be appropriate to discuss an accelerated QE taper in December. **
Additionally, the Fed’s Bullard called for at least two rate hikes in 2022. Finally, several FOMC members will speak this week, possibly reiterating the hawkish mood.
The Fed funds futures indicate the Fed first rate hike should come July 2022, and the following rate increase is expected by November 2022 . So by then, the QE should be long over.
Moreover, US yields continue to climb, with the two-year yield rising to the current cycle highs at 0.55% , while the ten-year yield returned to 1.6% today.
The USD has been sensitive to the hawkish shift in monetary policy. As a result, the dollar index jumped to 96.00, the highest level since July 2020, sending the EURUSD pair below 1.13. Gold and silver usually have a hard time in such an environment, although the actual inflationary fears still support both metals.
On Wednesday, traders will pay attention to the US GDP data for the third quarter. Furthermore, the Fed’s minutes from the latest decision will be released, possibly reinforcing the hawkish narrative.
Significant technical levels on the daily chart
As previously mentioned, gold must defend the 1,830 USD threshold. Otherwise, the risk of a more extensive correction can’t be ruled out, targeting the 200-day moving average at 1,800 USD. Additionally, the short-term ascending trend line is also there.
The MACD indicator is about to send a bearish signal from an elevated level, usually leading to a decline in prices over the following days.
Alternatively, if the support is defended, we could see a quick rally, targeting the current cycle highs at around 1,865 USD. Gold must close above that level on a daily basis to confirm the medium-term uptrend, with the next level to watch at 1,900 USD.