Gold Passes the First Bullish Test

Gold made quite a turnaround early this month when it traded below $1,615, which is now a decent support zone. XAU/USD bounced from there and gold hasn’t looked back since. Sentiment improved after US consumer inflation CPI came in softer than expected, falling below 8%, freeing the FED from pressure to continue raising rates at its current pace.

Although, GOLD reached the 200 SMA (purple) on the daily chart which price rejected and XAU started pulling back lower in the middle of last week, ahead of the rest of the other assets. The US retail sales report, which came in stronger than expected for October, pushed the USD higher and risky assets fell lower.

Gold Daily Chart – The 100 SMA holds as support

Gold is turning bullish again

So that put the bullish reversal into question and gold fell from $1,787 to $1,728. Although we saw an attempt to push gold higher on Tuesday as buyers moved back in. Sentiment improved despite further coronavirus restrictions and lockdowns in China, while we saw quite a bit of bullish momentum yesterday as the USD pulled back as risky assets surged.

The US manufacturing PMI indicator fell this month, while services that were already there fell even further. That reduced the likelihood of the FED raising rates at its current rate (75 basis points), and the FOMC minutes from the last FED meeting also looked less aggressive, indicating a slower pace of rate hikes. The USD turned bearish, while risky assets and gold jumped higher and have been rallying in the last few trading sessions. So moving averages turn into support, suggesting that buyers are in control and the bullish trend is underway again.

Golden XAU Live chart

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