Gold Remains Vulnerable Below $1800 Key Level And 200-Day MA

By Zain Vawda of DailyFX

Thursday, November 17, 2022 6:08 AM EDT

Gold (XAU/USD) Fundamental Backdrop

Gold continued its slide in Asian trade as renewed dollar buying saw the precious metal test the $1760 area. Yesterday’s US retail sales data coupled with hawkish rhetoric from Federal Reserve policymakers Mary Daly and John Williams seemed to weigh heavy on the precious metal.

The shift in sentiment was led by positive US retail sales data which recorded its biggest increase in 8 months followed by comments from Federal Reserve policymakers Mary Daly and John Williams. The Fed policymakers confirmed smaller rate hikes may be in store but warned a pause is off the table. Daly also didn’t rule out a further 75bp hike while stating the need to reach a peak rate of around 5% and hold it there to combat inflation. Markets seem to have interpreted Daly’s comments as hawkish with the probability of a higher Fed funds peak rate for 2023 increasing.

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A deeper retracement cannot be ruled out for gold as it remains at the mercy of the US dollar and broader sentiment. On the economic docket for the day, we have US building permits as well as initial jobless claims data, neither of which is expected to have any significant impact. The focus will be on the host of Federal Reserve speakers and their comments regarding the potential size of December's rate hike as well as the peak rate moving forward. Based on yesterday’s evidence this could provide the US session with some volatility as well as direction for gold toward the end of the week.

Gold (XAU/USD) Daily Chart

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Source: TradingView

From a technical perspective, gold has printed an inside bar candlestick pattern which hints at further downside while the RSI has just dropped out of the overbought territory. Following the breakout of the 2022 downtrend, the pair has seen very little retracement while trading some distance away from the 20, 50, and 100-SMA.

A deeper retracement cannot be ruled out with the weekly low around $1753 likely to provide significant support. A return of dollar bulls could facilitate a break below and could open up a retest of the September and October highs around the $1730 handle.

Alternatively, a rally higher needs to clear the current weekly high around $1786 and could result in a retest of the $1800 key level (August highs) which lines up with the 200-day MA.

Key intraday levels that are worth watching:

Support Areas