The Federal Reserve raised interest rates by 75 basis points for the third time continuously, and the Chairman, Jerome Powell said at the following news conference that a period of sub-normal economic growth likely happened. No one knows if this process will lead to a recession. However, he also pointed out that if inflation cannot be stabilized, it will lead to even bigger problems in the future. Therefore, reducing inflation is their primary concern. The Fed expects to raise interest rates by 125 basis points by the end of the year. When it comes to raising interest rates sharply, the Fed re-states that continued rate hikes are appropriate and expects monetary policy to be more hawkish. Thus, it is expected that the US dollar will continue to maintain a strong upward trend in the future. In addition, there is news that Russia has conducted a general mobilization of the war and is preparing to increase the scale of the war, which promotes more safe-haven funds to flow to the US dollars instead of gold.

As of the close on 23 September, the weekly chart of gold officially fell below USD 1,680. The long-awaited M head market is coming soon. The downside has been shown and the next will start a new round of decline. After more than two years of high-level consolidation, it has finally come in a clear direction. It is expected that the high probability of the market will not only drop for one to two weeks. That time, the gold price started its upward trend in 2018 and rose by more than USD 800 in 2020. The current decline is close to a decline of USD 200 - 300. In figure 1, the monthly chart is more significant, with support below USD 1,560. The next level is USD 1,450. If you are still impressed by the article in August, it mentioned that gold had a chance to fall to 0.618 to support the area of USD 1,450 - 1,460. The downside is close to more than USD 200. At present, this goal is not out of reach.

The daily chart shows that the downward trend has not changed. If investors want to see more rebounds, they must at least break the upper LH before they can rebound, as shown in Figure 2. Therefore, there is an absolute advantage in trading with the decline, even if the relative strength index (RSI) is below the midline. However, I personally think that the indicators always have a lag, and the current situation of the bull has not been strong. Gold prices are now expected to fall further after falling below USD 1,680. Gold bears will continue to focus on the lows of USD 1,450 once the trend of downward builds up. I look forward to confirming it with you next month.

Hugo Leong

Gold Analyst of Hantec Group