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Metals have been in a strong uptrend throughout the year, with gold approaching the 2,800 area. However, metals are now reaching some extreme sentiment levels, so we wouldn’t be surprised if a significant pullback occurs. Interestingly, gold trended upward in October, even with a stronger dollar, but with the upcoming U.S. elections and US currecny in focus and potential Trump victory, we expect the dollar might strengthen further after a pullback, which could lead to a deeper retracement in gold, especially given some selling pressure last week.

It’s also worth noting the relationship with the Chinese yuan, which typically correlates positively with gold. But this correlation, however, broke in October, and such divergences can then point to trend reversal. 

USDCNH vs. GOLD

Observing USD/CNH, we see a nice rise from the 7.00 level, suggesting a possible bottoming formation, with a HS pattern indicating that wave C may still show up. If this is really going to be the case, a rally in USD/CNH could send Gold back below 2,700 in the short term.

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