SunSirs: $400 in One Week? Gold’s Rollercoaster Ride Stuns Traders

Xinhua Finance News, Beijing, Oct. 27 (Xinhua) -- International gold prices saw a sharp decline after a surge last week (the week of Oct. 20-24), showing a violent and dramatic price fluctuation. The spot gold price opened at 4,250.93 U.S. dollars, reached a high of 4,381.48 U.S. dollars, a low of 4,002.89 U.S. dollars, and closed at 4,111.56 U.S. dollars. The weekly range was 378.59 U.S. dollars, with a weekly decline of 139.38 U.S. dollars, a decrease of 3.25%.

Overall, the gold price showed a small bearish candlestick pattern on the weekly chart, closing above $4,000, but it still ended the previous weekly "nine consecutive weeks" strong upward trend, turning into a high-level correction pattern.

Fundamentals: Short-term positive factors are weakening, but the driving force for medium and long-term growth remains.

Fundamentally, in the short term, the main factors leading to the decline in gold prices from the highs are the ceasefire in the Middle East, the strengthening of the US dollar, and the liquidation of profits at the high levels.

Specifically, the Palestinian Islamic Resistance Movement (Hamas) and Israel began a new round of Gaza ceasefire negotiations in Sharm el-Sheikh on October 6, and the mediators, including Egypt and Qatar, announced the first phase of the ceasefire agreement at dawn on the 9th local time. The agreement came into effect at 12 noon on the 10th. On the evening of the 13th, leaders of several countries and international organizations held a summit in the Red Sea coastal city of Sharm el-Sheikh, Egypt, focusing on the first phase of the ceasefire in the Gaza Strip. Leaders of Egypt, the United States, Turkey, and Qatar signed a document to guarantee the ceasefire agreement. On October 24th local time, various Palestinian factions issued a statement after holding a meeting in the Egyptian capital, Cairo, reiterating their support for and continued implementation of the measures of the Gaza ceasefire agreement and demanding that the Israeli occupying forces withdraw from the Gaza Strip.

Although there are still some small incidents during the implementation of the ceasefire agreement, the overall implementation of the first stage of the ceasefire is still in place, which means that the situation in the Middle East has temporarily ease, and the resulting demand for gold as a safe-haven asset has also weakened accordingly.

Meanwhile, the US dollar index has been fluctuating upward for a week, which has suppressed gold prices. Although the US September CPI data, released on Friday last week (October 24), strengthened the expectation that the US Federal Reserve will continue to cut interest rates this year, causing the US dollar index to fall slightly on that day. However, looking at the whole week, the US dollar index still rose by 0.13% on a weekly basis, continuing the fluctuating recovery trend of recent weeks.

Against this backdrop, the profit-taking pressure began to show after the sharp rise in gold in the short term. Since the late August, the international gold price has increased by more than 1,000 US dollars, which is rare in history. Affected by this, the domestic gold price has also made a rare attempt to break through the four-digit level of 1,000 yuan per gram. However, the profit-taking and selling behavior after the sharp rise in the short term will inevitably lead to an increase in market fluctuations.

However, from a medium to long-term perspective, the expectation of interest rate cuts by the Fed, the strengthening of sanctions against Russia by the West, and the instability of the regional situation are still the main driving factors for the long-term strength of the gold market.

The Federal Reserve is set to hold its interest rate meeting this week. According to the latest economic beige book from the Federal Reserve, the overall stagnation of economic activity in the third quarter of the United States, along with weak retail consumption and low employment demand, has dampened market expectations for inflation. This has led to strong market expectations that the Federal Reserve will cut interest rates by at least 50 basis points in the remaining part of the year.

Meanwhile, the Russia-Ukraine conflict continues to drag on. On the 22nd, US Treasury Secretary Janet Yellen announced that the United States would impose sanctions on the two largest oil companies in Russia and urged Russia to immediately cease hostilities with Ukraine. On the same day, the European Union member states reached an agreement on the 19th round of sanctions against Russia. This means that the end of the geopolitical conflict in Europe is still far away.

Comprehensive fundamental analysis, in the short term, after the process of profit-taking selling is over, the market may re-evaluate the changes in medium and long-term fundamentals. At present, the expanding scale of US debt, the benefits of the interest rate cut cycle, and the restructuring of the global monetary system will all be important support factors for the long-term strategic allocation of gold assets.

Technical analysis: The weekly chart has reached a nine-day winning streak as expected, or it may turn into a range consolidation.

From a technical perspective, the high of gold price adjustment drives more obvious.

Analyzing the time cycle of the overall trend of gold prices, since the second half of 2024, the duration of the two rounds of upward trends in gold prices has been 17 weeks and 19 weeks, with an average of 18 weeks. In this round of the trend, the current one is in the third upward cycle since the beginning of July, and it entered the 18th week last week. The previous weekly report also indicated that the gold price is approaching a turning window period. Currently, the overall trend of gold prices meets the expectations. After experiencing a nine-week winning streak, although the gold price still created a new historical high in the last week, it then fell sharply as expected, and created the largest single-day decline in twelve years. However, subsequently, the gold price has repeatedly stopped falling at the 4000 dollar level, indicating that market sentiment has been repaired, and the short term may enter a fluctuating repair cycle.

From the current moving average system, after the gold price has been rising for nine consecutive weeks, the first adjustment has touched the 5-week moving average and the 4000 dollar psychological level. It is expected that the gold price will still receive key support near the integer position. The daily K-line chart shows that in the past two months, the 5-day moving average has crossed the 10-day moving average for the first time, and the price has temporarily maintained below the double moving average, that is, below the 4200 dollar integer. From the overall trend, the gold price has a support of 4000 dollar integer and psychological level, and an upper resistance of 4200 dollar integer, indicating that the gold price may temporarily fluctuate and correct in the 4000-4200 dollar range in the short term. If the gold price breaks through upward, the 4250 dollar level will be an important resistance within the week; if it breaks through again and breaks through the 4300 dollar level, it is necessary to be alert to the risk of falling back at a high level. On the other hand, under the current fluctuating pattern, if the gold price loses the 4000 dollar position downward, the primary concern is the support near the 3950 dollar level. If the gold price continues to adjust deeply, the 3850-3830 U.S. dollar zone will be the key opportunity to stop falling and recover.

Overall judgment, the sharp adjustment last week indicates that the previous nine-week continuous rise pattern of gold prices has temporarily come to an end, and the short-term gold price will fall into a fluctuating and repeated pattern. This week, the focus is on the fluctuation range of the 4000-4200 U.S. dollar zone. On the operational level, it is temporarily based on the short-term operation of buying low and selling high within the zone.

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