Gold faces resistance at $2,665: can bulls break through? Weekly XAU/USD analysis + forecast
Hello, fellow traders!
Gold prices dropped early in the week, driven by strong U.S. economic data that boosted the dollar and kept the yellow metal under pressure. Concerns over China's slowing economy added to the bearish sentiment.
Later in the week, Gold managed to recover thanks to softer U.S. inflation data and higher jobless claims. The price is now hovering around $2,657 as traders expect key data from China next week.
In this week’s update, I’ll:
Look at the technical setup of XAU/USD and what it tells us about potential future price action.
Highlight the recent key support and resistance levels.
Break down this week’s key economic data from around the world (audio available!) and how it might affect XAU/USD in the mid term.
Explain the latest shift in the market sentiment as to the COT report and what it means for Gold's outlook.
Share my short-term and mid-term predictions on XAU/USD price action and trajectory.
📊 Let’s look at the technical data
Last 6 months - 2h charts
Key takeaway:
The medium-term trend remains bullish. In the very short term, multiple indicators suggest a potential pullback or consolidation. We will likely see renew bullish momentum if the price breaks above 2,660. A drop below 2,650 could lead to further downside.
The price is above all major moving averages, indicating an ongoing bullish trend.
The price is close to the averages, which hints we might see a pullback or sideways movement if buying pressure slows down.
RSI is approaching overbought levels and the price is near the upper band of the Keltner Channel, reinforcing the idea that the market could be ripe for a short-term pullback or consolidation. We might see a pullback to the middle band near 2,639.85.
The MACD shows there's bearish pressure building, which might result in further downside.
Bulls are still in control. However, ADX and ROC show no strong momentum, so we may not see explosive moves in the short term. Instead, expect choppy or sideways movement.
Last 3 months - 1h charts
Key takeaway:
The short-term trend remains bullish, but many indicators are showing overbought conditions, increasing the risk of a pullback or consolidation in the near future. However, the overall trend is intact, and the market remains well-supported by key levels such as
the Ichimoku Kumo and the SMA 200 near 2,641-2,642. The ADX and OBV show strength, indicating that any dips may be opportunities for bulls to re-enter the market.
Short-term bullish momentum is strong as the price is above all the major SMAs and VIDYA, confirming upward pressure. This aligns with the broader uptrend seen in the 6-month charts.
The price remains above the Ichimoku cloud, which supports the bullish view, but the thinness of the cloud indicates a lack of strong support. A breakdown could quickly accelerate to lower levels.
The market is showing overbought conditions here too (as seen in Williams %R, SMI, and CCI), reinforcing that short-term corrections or consolidation could occur.
Moderate volatility is in play. The low ATR could mean consolidation, but if volatility picks up (ATR rising), we could see sharper moves in either direction.
Last 30 days - 30min charts
Key takeaway:
Indicators show continued buying pressure, aligning with the OBV from earlier charts. Despite short-term overbought conditions, a larger bullish trend could continue to form. This aligns with the overall bullish trend observed in the Ichimoku Cloud and Moving Averages. Short-term corrections are likely, but the overall bias remains upward.
The price is above the McGinley Dynamic (currently at 2,651.37), which acts as a dynamic moving average. This suggests that the short-term trend remains bullish.
Again, the price is getting close to overbought conditions as seen in BB, and Stochastic signals, and SVP.
Despite short-term overbought conditions, STC suggests that a larger bullish trend may be forming.
The SQZMOM is showing that bullish momentum is building. Volatility is low and price could break out soon. The green bars show the breakout is bullish.
The volume profile shows solid support between 2,646 and 2,653, which might prevent a sharp downturn.
💡 Key Levels To Watch
Resistance:
2,665 - 2,670: level near the upper Bollinger Band with a volume node around, indicating past significant trading activity. Price has repeatedly struggled to stay above this area in recent sessions. Bulls need to break above 2,666 to maintain upward momentum. Expect sellers to emerge here unless strong buying pressure continues.
2,680 - 2,684: the next significant barrier. A break above 2,670 would target this zone. If the price tests this resistance, it will face serious selling pressure, and only a strong breakout would lead to further upside.
Support:
2,641 - 2,646: a strong short-term support level where multiple indicators converging around this range (VWAP, McGinley Dynamic, SMA 200, the lower BB midline). If prices pull back, expect buyers to step in around this area. It’s a crucial zone where bulls will try to defend the uptrend.
2,630: a major support with high-volume cluster here. A move below would imply a larger pullback.
📰 Key economic updates
👂 Listen about major macro events from this week:
🇺🇸 The United States
The FOMC Minutes - no clear path for future rate cuts
The FOMC is cautious about future rate cuts. While a 0.5% cut was the majority decision in recent discussions, some members preferred only 0.25%.
The Fed is monitoring inflation and the labor market closely before committing to any further cuts. A 0.75% rate reduction by the end of 2024 is possible but will depend on how the economy evolves.
Importantly, no fixed path for rate cuts is set, which adds uncertainty to the market as investors look for clearer guidance on monetary policy.
Consumer Price Index (CPI) - 0.2% MoM, ↓ 2.4% YoY
Core Consumer Price Index (CPI) - 0.3% MoM, ↑ 3.3% YoY
The inflation rate increased more than expected, partly due to disruptions like Hurricane Helene and the Boeing strike.
Despite this, inflation was still lower than the previous month and the lowest since early 2021.
Inflationary pressures from food and shelter continue to drive costs up.
Energy prices dropped by 1.9%, which helped to offset some of the inflation.
Producer Price Index (PPI) MoM - ↓ 0.0% MoM, ↓ 1.8% YoY, below the forecast
Costs for producers are stabilizing, especially due to lower fuel and crude prices.
This bodes well for consumers, as lower producer costs may lead to lower retail prices in the future.
Services for intermediate and final demand rose 0.2%, showing that inflation is still sticky in labor-heavy sectors → this might limit how quickly consumer prices fall.
Initial Jobless Claims - ↑ 258,000, the highest level since August 2023
The spike of 33,000 from the previous week's 225,000 is largely attributed to Hurricane Helene and the Boeing strike, meaning it’s not necessarily indicative of broader labor market weakness.
As this is seen as a temporary rise due to disruptions, it might not affect the overall job market outlook unless claims continue rising in the coming weeks.
Economists still expect the Federal Reserve to cut interest rates by 0.25% at their upcoming meeting in November.
The Michigan Consumer Sentiment Index - ↓ 68.9
The dip is notable but still leaves sentiment 8% higher than a year ago and 40% above its low in June 2022.
Consumers remain concerned about high prices, even though inflation expectations have eased recently.
Long-term business conditions improved, reaching their highest level in six months.
Some of the decline in sentiment could also reflect uncertainty with the upcoming U.S. elections and broader geopolitical events, though fewer than 5% of consumers linked these issues directly to economic concerns.
Potential impact on Gold → sideways or modest upward movement in the short-term
In the short term, XAU/USD could see sideways or modest upward movement due to economic uncertainty, temporary labor market disruptions, and concerns over core inflation.
Medium-term outlook depends heavily on the Fed’s actions. If the Fed becomes more dovish and signals further rate cuts, Gold prices are likely to rise.
However, if inflation continues to cool and economic conditions stabilize, Gold’s upward potential might be limited, as investors could shift back to riskier assets.
🇨🇦 Canada
Balance of Trade → -$1.1 billion, the 6th consecutive monthly deficit
Canada’s trade deficit widened, with falling exports, especially in energy (-3.0%), and rising imports.
This reflects weakness in the global demand for commodities like crude oil, which could signal broader economic concerns.
Canada, being a resource-driven economy, is sensitive to fluctuations in commodity prices, and this weakness could weigh on the overall global economy.
With energy exports declining and imports rising, Canada’s trade deficit could keep growing.
Gains in agriculture and non-U.S. Gold exports might help, they probably won’t be enough to fully offset the weakness in the energy sector.
Unemployment Rate - ↓ 6.5%, first decline since January 2024
Canada added 47,000 jobs in September, exceeding expectations and marking the largest monthly gain since May 2022.
Total hours worked dropped by 0.4%, the participation rate fell again, and wage growth slowed.
Slowing wage growth and uneven employment recovery indicate a fragile economy, which could add pressure on the Bank of Canada to continue cutting rates to support the economy.
We’ll likely see a 0.25% rate cut soon unless there’s a sharp deterioration in economic indicators before the next BoC decision.
Potential impact on Gold → upward momentum in the short-term with risk of range-bound movement
Given the current data, XAU/USD could see upward momentum as global economic concerns rise due to weakening trade data from Canada and other commodity-driven economies. Risk aversion might push investors into Gold as they hedge against possible slowdowns.
However, any significant U.S. dollar strength (due to weak CAD or strong U.S. economic data) could limit Gold’s gains, leading to range-bound price movements in the short term.
If the Canadian economy weakens further and global demand for commodities stays low, this could signal a broader global economic slowdown. In this scenario, we could see sustained upward pressure on Gold prices as investors seek protection from both economic uncertainty and currency volatility.
The direction of central banks (especially the BoC and the Fed) will be key. If rate cuts continue, it will likely support higher gold prices as real interest rates decline, making gold more appealing as a safe-haven asset.
🇦🇺 Australia
NAB Business Confidence - ↑-2, increased by 3 points but remains negative
The weakest confidence was seen in retail and wholesale sectors.
Notable gains in business conditions were recorded in manufacturing (+11pts), recreation & personal services (+5pts), and retail & wholesale (+5pts and +4pts, respectively).
Forward orders remained weak at -5 index points.
Nonetheless, high capacity utilization indicates that businesses are operating near full potential. This could mean that any further demand increases might push up costs or prices again, even as current cost pressures ease.
With easing inflation and moderate growth, this data supports a "soft landing" scenario for the economy, which would likely encourage central banks like the RBA to hold off on aggressive rate hikes.
RBA Meeting Minutes - cautious stance, with potential for either tightening or easing
The Reserve Bank of Australia (RBA) has kept its interest rate steady at 4.35%, a restrictive level intended to curb inflation, which remains elevated at 3.9%.
A rate hike may be necessary if there’s a strong pick-up in consumption, constrained supply, or weak productivity growth.
Rate cuts could be justified if household spending remains weak, the labor market softens, or inflation falls more quickly than expected.
There are concerns about weak economic growth, especially as households are saving much of their disposable income from tax cuts, leading to lower-than-expected spending.
Westpac Consumer Confidence Change - ↑ 6.2%, moderate optimism
The uptick in sentiment reflects optimism that inflation is moderating in Australia, reducing fears that the RBA might raise interest rates further.
Consumers are increasingly expecting stable or lower mortgage rates, with the Mortgage Rate Expectations Index dropping by 14.1%.
The overall index remains below 100, suggesting that pessimism still dominates, largely due to ongoing cost-of-living pressures.
Potential impact on Gold → trending higher in the short term
With the RBA likely leaning towards a rate cut if growth continues to slow and the BoC expected to ease policy, the global trend of lower interest rates will reduce the opportunity cost of holding non-yielding assets like Gold. Rate cuts would weaken the AUD and CAD, increasing Gold’s appeal, particularly for investors hedging against currency depreciation.
Persistent cost-of-living concerns and pessimism around household finances suggest that consumers are still uncertain about the economic future. This uncertainty keeps gold demand stable as a hedge against financial stress.
The long-term trajectory for Gold will depend on the depth of rate cuts and the overall performance of the global economy. If global growth continues to slow while central banks like the RBA and BoC lower rates, Gold could see sustained upward momentum.
🇨🇳 China
National Development and Reform Commission Briefing
China’s leaders are confident they’ll hit their 5% growth target this year, but they admit it’s getting harder. The economic environment, both at home and globally, is challenging.
China is speeding up the release of 100 billion yuan in public investment originally set for 2025 to boost growth sooner.
Despite expectations, China didn’t announce any massive new stimulus measures. They focused on bond issuance and projects.
The World Bank and economists expect China’s economic growth to slow further, especially by 2025.
Structural issues like the ongoing property market problems and weak domestic demand are dragging the economy down. On top of that, China’s factory activity is declining, with key indicators pointing to economic contraction.
The slowdown in China is likely to put pressure on other economies in Asia, especially in terms of currencies and commodities. Precious metals like gold could be affected as China’s economic trajectory impacts global demand.
On Saturday, China’s Finance Minister has hinted at more economic support, but the size and timing are still uncertain.
Analysts estimate that China needs a fiscal stimulus package between 2 trillion yuan ($283 billion) and 10 trillion yuan to make a meaningful impact.
Potential impact on Gold → bullish due to uncertainty
China hasn’t rolled out a massive stimulus package, which is creating uncertainty in the markets. Gold, being a safe haven, tends to benefit from uncertainty, so we might see more interest in XAU/USD in the short term as investors look for stability.
China’s growth is slowing, and there are concerns they might not meet the 5% target for 2023. Additionally, the property market and local debt issues are far from resolved. If Chinese economic data continues to underperform or if further fiscal stimulus disappoints, Gold could see a rise due to increased demand from investors moving away from riskier assets.
China’s consumer inflation is growing slower than expected, which suggests weak domestic demand. While this could signal lower global inflationary pressures, it could also mean China might resort to rate cuts or other monetary easing to stimulate growth, which could be bullish for Gold.
However, a weaker Chinese economy may also bolster the U.S. dollar as investors flock to USD for safety, which usually has a negative correlation with Gold. If the dollar strengthens, XAU/USD could face downward pressure.
🇩🇪 Germany
Balance of Trade - trade surplus of €22.5 billion
This was driven by a 1.3% rise in exports, despite a 3.4% decline in imports.
Germany’s exports grew primarily due to demand from the United States (+5.5%) and the United Kingdom (+5.7%). Exports to EU countries also rose by 0.8%, and to non-EU countries by 1.9%.
Imports, particularly from Russia, dropped significantly (-29.1% from July and -41.4% year-on-year), as Germany continues to cut ties with Russian energy and goods.
Experts warn that the German export sector is still facing headwinds, like high energy costs, excessive taxes, and ongoing bureaucracy issues.
There’s concern that Germany’s trade surplus, adjusted for inflation, could still decline in the third quarter.
Potential impact on Gold → moderate support
The numbers might indicate economic resilience. A stronger German economy could lead to higher confidence in the Eurozone, which may reduce immediate demand for Gold as a safe-haven asset.
A stronger German trade surplus could strengthen the euro relative to the U.S. dollar, as Germany is a key player in the Eurozone economy. If the euro rises, the U.S. dollar might weaken in response, which is bullish for Gold.
The drop in imports, especially from Russia, could put downward pressure on energy costs in Germany, helping ease inflation. This means central banks might consider easing monetary policy in the long run, which would support Gold.
A drop in imports suggests weaker domestic demand and economic strain. There are concerns about long-term growth. Global markets could become more risk-averse, potentially boosting safe-haven demand for Gold.
🇬🇧 United Kingdom
GDP MoM - ↑ 0.2%, growth after two months of stagnation
All major sectors showed growth, but services (the largest part of the UK economy) grew weaker than expected.
Compared to last year, the UK economy is now 1.0% larger, but this falls short of the 1.4% growth forecast by economists.
The BoE expects slower economic growth in the second half of the year.
The market anticipates a rate cut at the BoE’s meeting on November 7, marking its first cut in over four years.
Potential impact on Gold → bullish momentum
The UK's economic growth is below expectations, with year-on-year growth at just 1.0% (lower than the forecast). This can lead to increased risk-aversion, which tends to benefit safe-haven assets like Gold.
With a rate cut now likely in November, the UK could see a weaker pound (GBP), which tends to support Gold prices.
There is no indication of strong inflationary pressures. If inflation remains subdued, the BoE and other central banks could stay dovish or even adopt more easing measures, further reducing the appeal of bonds and interest-bearing assets relative to Gold.
🎭 Market sentiment
Global Gold ETFs saw their fifth month of inflows, with $1.4 billion added, mostly from North America
This surge in inflows turned the year-to-date (y-t-d) flows positive to $389 million.
However, Europe had net outflows, mostly driven by UK funds, while Asia continued to see strong inflows for the 19th month in a row.
North America led the inflows, helped by the U.S. Federal Reserve’s 50 basis point rate cut in September, which pushed bond yields down and weakened the dollar, making Gold more attractive.
In contrast, Europe saw $245 million in outflows after a four-month streak of inflows, primarily due to a cautious stance from the Bank of England, which kept its rates steady at 5%.
Asia, especially India, saw $175 million in inflows, with strong Gold prices and geopolitical tensions pushing demand higher.
Globally, Gold trading volumes rose by 7% month-over-month. On the COMEX exchange, total net long positions rose to 976 tonnes by the end of September, a 6% increase month-over-month, the highest since February 2020. This reflects growing bets on future U.S. interest rate cuts.
This data suggests strong upward momentum for Gold, particularly in North America. With bond yields lower, investors are likely to continue shifting into Gold ETFs.
The inflows we’re seeing signal strong demand, which is likely to support higher Gold prices in the near term.
China's central bank stopped buying Gold for the fifth month in a row in September
This pause seems to be because Gold prices have gone up a lot.
Even though China didn’t buy more, the value of its Gold reserves went up, mainly because prices rose. As of the end of September, China holds 72.8 million troy ounces of Gold, worth around $191.47 billion.
China had been a big buyer until May 2023 when they paused purchases. This decision to hold off has reduced demand from Chinese investors.
Experts believe China wants to buy more Gold but is waiting for prices to drop before making new purchases.
However, with the global environment—falling interest rates and rising geopolitical risks—Gold prices are predicted to go higher, possibly over $3,000 per ounce. If this happens, China might reconsider waiting and start buying again sooner.
The Commitments of Traders (COT) report
Open Interest
Total Open Interest: 875,966/-39,283
Traders are closing positions, which can often indicate indecision or consolidation in the market.
They might be awaiting clearer signals before committing to further moves.
Producer/Merchant Positions - typically large corporations or mining companies hedging their exposure to Gold
The drop in both long and short positions shows they are reducing exposure.
This could mean they expect less volatility or are comfortable with current price levels, hinting at some stability in Gold's future price from the physical side of the market.
Swap Dealers - financial institutions that make markets and provide liquidity
These are reducing their overall bearish exposure while increasing their long exposure.
They might be positioning for a potential upside in Gold prices in the short to medium term. This is a key development since these players often have deep insight into market conditions and macroeconomic trends.
Managed Money - hedge funds and other institutional investors
Institutional investors significantly reduced their long positions.
This could mean hedge funds are taking profits or reducing exposure due to potential near-term risks, such as expectations of growing dollar strength.
The fact that short positions barely changed indicates that while they are becoming more cautious, they are not strongly betting on Gold's decline either.
Other Reportables - smaller institutional traders, like prop trading desks
These show a modest increase in both long and short positions.
This mixed movement suggests they are positioning for possible volatility.
These traders could be looking to take advantage of range-bound movements or hedge positions.
Nonreportable Positions - retail traders or smaller speculators
These are reducing their participation overall.
Retail traders tend to be more reactive to price changes, and their reduction in positions might indicate a lack of conviction in either direction or concern over short-term price action.
Key takeaways:
The significant drop in open interest could indicate a period of consolidation or hesitation among traders, which often precedes a larger move.
There’s a growing bullish sentiment in the professional market-making segment, which could support Gold prices in the near term.
Hedge funds are becoming more cautious. This might reflect concerns about near-term downside risk, potentially driven by rising bond yields, a strong USD, or monetary policy expectations.
Retail traders are stepping back, which could mean less speculative pressure on Gold in the immediate term, likely resulting in less volatility unless a significant catalyst emerges.
👀 What to expect
Technical side
Next few days - consolidation or mild pullback:
Indicators across multiple charts are showing overbought conditions and the market is temporarily stretched.
There’s strong support around 2,640 and 2,630, so if the price dips, this would be a crucial test.
If the price holds above 2,645 and maintains current bullish momentum, expect it to test the 2,670-2,684 resistance.
Mid-term outlook (1-2 weeks) - continued bullish trend, but with consolidations:
The larger trend remains bullish.
Given the strength of volume and buying interest from OBV and EFI indicators, any dips are likely to be bought quickly, keeping the broader uptrend intact.
If momentum holds, the price might move higher into the 2,700+ range.
Overall outlook
The gold market is at an interesting juncture. There's a tug-of-war between factors that could push prices up and those that might hold them back.
The Fed is playing it cautious with future rate cuts. They're not committing to a clear path, which adds a layer of uncertainty.
Looking globally, we've got some red flags:
Canada's trade deficit is widening.
Australia's business confidence is still in the red, and the RBA is sitting on the fence, too, ready to go either way with rates.
China is confident about hitting its 5% growth target, but let's be real—their economy is facing headwinds.
Germany's trade surplus grew, but mainly because imports tanked. That's not exactly a sign of strong domestic demand.
The UK's GDP saw some growth, but services (their big sector) underperformed. With the BoE expected to cut rates, the pound could weaken.
Economic slowdowns or uncertainties in major economies tend to boost Gold's appeal as a safe haven. If global growth is stalling and central banks are leaning towards rate cuts, the opportunity cost of holding Gold decreases.
Given the mix of economic data and central banks holding their cards close, we might see Gold prices move sideways or inch upwards in the short term.
In the mid-term, Gold still has potential for stronger gains. Persistent weaknesses in economies like China and Germany could amplify recession fears. In such a climate, Gold often shines as a store of value. Plus, if major central banks like the Fed, BoC, and RBA keep/start cutting rates more aggressively, real interest rates would fall. This scenario is typically bullish for Gold.
So, while we might not see explosive movements immediately, the pieces are in place for Gold to trend higher, especially if global economic data continues to soften.
Safe trading,
and remember: All that glitters is not Gold,
Joe