XAU/USD, the gold pricing pair, is looking to break-up of a consolidative phase around the psychological $4,000 level on Monday. This is occurring amid rising global demand for the US dollar and widespread global economic uncertainty caused by the still-unfolding US government shutdown, among other factors. As financial markets look to pivot in new and surprising ways, they are still lacking the new data and new catalysts.
On Monday, XAU/USD hovered right around the $4,000 threshold. This $20,000 price point is important, as it is a psychological barrier for many traders. The 20 Simple Moving Average (SMA) is at $3,996, but the 200 SMA is lower at $3,978. Overall, these indicators are pointing towards the price action being at a tipping point.
The momentum for XAU/USD has recently shifted to the downside, foreshadowing trouble in the near-term for gold prices. This reading on the momentum indicator has fallen back into the negative, showing persistent bearish sentiment among traders. Technical analysis The Relative Strength Index (RSI) for XAU/USD has fallen to 48. The above suggests that the asset is currently neither oversold nor overbought, signalling a market wide play of indecision.
Professional market analysts have called a downside risk skew for XAU/USD. If the price doesn’t manage to reclaim the 20 SMA, it could fall once more down to the ascending support band. Look for retest possibility in the $3,590–$3,353 range. Such a scenario would set major psychological levels for investors to keep an eye on in judging where to enter or exit trades.
In this case, a daily close above the 20 SMA currently at $4,088 would be enough to re-establish the bullish XAU/USD outlook. This movement could be a sign that bulls in the market are starting to feel confident again. Beyond that, it can be the necessary spark for that upward trajectory. Until we can reclaim this important short-term moving average, bearish pressures will likely remain in control.
Against this technical backdrop, macroeconomic realities are having their own impact on the markets. US manufacturing production was little changed in October, giving investors a slight boost. However, ongoing concerns regarding the government shutdown have resulted in a lack of fresh economic data and insights that could guide market participants.
On Tuesday, the Reserve Bank of Australia will meet to decide on monetary policy. This announcement introduces more uncertainty for gold traders. Any shift in policy or stance from the RBA would likely have a major impact on global market movements. These changes can indirectly raise gold prices, too.
Financial markets are continuing to deal with uncertainty as they look for new catalysts. With the long-term government shutdown here in the U.S., we’re running low on new data and perspectives. In effect, traders are spooked. Traders are anxiously awaiting some concrete action or announcement. They’re looking for other signals that might help drive gold prices higher and establish a positive sentiment across the market.