Gold Price Remains Capped By 50-Day SMA Ahead Of Fed Rate Decision

The price of gold may continue to move to the beat of its own drum as the low-interest-rate environment along with the ballooning central bank balance sheets no longer provides a backstop for bullion, and the decline from the record high ($2075) appears to be a shift in market behavior rather than an exhaustion in the bullish trend as the precious metal no longer trades to fresh yearly highs during every single month in 2020.

In turn, the V-shape recovery following the failed attempt to test the July low ($1758) may continue to be capped by the 50-Day SMA ($1872) even though the Fed’s balance sheet approaches the record high, and it remains to be seen if the Federal Open Market Committee (FOMC) will deliver additional monetary stimulus ahead of 2021 amid signs of a slowing recovery.

Nevertheless, the US Dollar may continue to reflect an inverse relationship with investor confidence as Chairman Jerome Powell and Co. rely on their unconventional tools to support the US economy, and the tilt in retail sentiment also looks poised to persist as the net-long US Dollar bias from earlier this year resurfaces.

Image of IG Client Sentiment

The IG Client Sentiment Report shows traders are net-long USD/CHFUSD/JPY, and USD/CAD, while the crowd remains GBP/USDEUR/USDAUD/USD, and NZD/USD even though the US Dollar price collapse enters its fifth consecutive week.

Looking ahead, swings in risk appetite may continue to influence the US Dollar as key market trends remain in place, but the price of gold may continue to move to the beat of its own drum as the advance from the monthly low ($1776) appears to be capped by the 50-Day SMA ($1872).

With that said, the Relative Strength Index (RSI) may highlight similar dynamic as it appears to be responding to trendline resistance, and the oscillator may continue to track the bearish formation from earlier this year as the record high ($2075) appears to be a shift in market behavior rather than an exhaustion in the bullish trend.

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