The Federal Reserve officials mentioned on November 14 that the Fed may soon slow down the pace of interest rate hikes. This leads the market to start to consider that there will be the end of the Fed's rate hike cycle. On the other hand, the holdings of SPDR, the world's largest gold ETF, are slowly increasing, reflecting some signs of bullishness among institutional investors. The consumer price index (CPI), which has always received much attention, is used as a forward-looking reference indicator for the level of inflation in the United States. There is a 7.7% increment year-on-year, which is the smallest increase since January 2022 and less than the expectation of 7.9% and 8.2% in September. The data shows that the growth rate has slowed down for four consecutive months, which is bearish for the US dollar and bullish for gold prices. Although the inflation rate continues to be high, the impact of the decline in the inflation rate on interest rate expectations provides room for the Fed to slow down the pace of interest rate hikes. With falling inflation data altering market expectations for U.S. monetary policy, the gold market appears to be in for a turnaround.  

Technically, gold has a false breakthrough near 1,650 (see weekly chart). This proves that gold has digested some of the downward force, but buyers are entering the market below the support level and extending the previous rebound to around 1,800. Following the article mentioned in the previous article that gold can be bullish, it has successfully reached the first target of $1,730 and broke through this area on November 10. Thus, the bullish view of gold in the future remains unchanged. Similarly, it can be seen that the downward trend line on the daily chart has been broken upwards. To sum up the above factors, gold is conditional to continue upwards further, so long operations will be relatively easy and more advantageous for investors.  

Now that the bullish position has been set, investors only need to find a suitable opportunity to enter the market. Corresponding to different types of investors, there are also two bullish positions derived from the technical level: 1. See if gold will pull back and retest the 1,730 breakthrough point before going up. 2. It is possible to go back to the depth of 1,680 and then go up. The position of $1,680 is also supported by the ratio of 0.618 on the weekly chart, and the support is expected to be stronger. Regardless of the view, you can first look at $1,800 for the upper target. Aggressive investors can choose the former, while conservative investors can choose the latter. They have their advantages and disadvantages in the two entry points, and the risks they bear are correspondingly different. However, the same stop loss should be placed below 1,600.

Hugo Leong

Gold Analyst of Hantec Group