20210924

<Gold Market Review>After FOMC, Gold Moves Like a Roller Coaster

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The Federal Reserve announced on September 24 that the benchmark interest rate remained unchanged. The U.S. dollar felt short-term after the release of the information. Gold first rushed to $1,786. Later, Powell mentioned that "inflation is rising, and it may last for several months to ease, and debt purchases will gradually reduce, which will end around the middle of 2022. If the inflation rate remains at a high level in 2022, the conditions of interest rates hike may reach by then. " This speech stimulated the dollar index to rise. It rebounded from the low point of the day to above 93.5, reversing the previous weakness. Gold fell from a high point to near $1,765, fully reversing the increase in interest rates after the announcement of the resolution.

Due to the approximate timetable for reducing debt purchases, in the short term, the gold bias will continue to fall to the previous bottom of $1,745, after the bottom broke, the next level will be $1,718. Technically, gold has been consolidating for a month since mid-August, and finally broke through the support level of $1,777. The longer it consolidates, the greater the momentum for breakthroughs. Since Gold entered the hype rate hike cycle, it has risen and falls less, and the decline is traceable. 

The 4-hour chart shows that gold has formed a support platform between 1,777 and 1,783, and there have been significant with three bottoms. Each time the price enters this area, it will rebound. It indicated the area has the buy for Gold. Investors tend to put their stop-loss below that area after doing long in this area. So they know that there are plenty of stop-loss orders under these three bottoms. So once this area breakthrough, the stop-loss order will be triggered, and plenty of empty orders will enter the market. In addition, there is a vacuum area below the support, and there is no support at all. Therefore, the rate of decline will be very fast, which looks like a crash and goes directly to the bottom until it reaches the underneath strong support 1,745 to stop. 

Look at the weekly chart again, the upper high point is getting lower and lower, and the lower part is also shaped by a support platform from 3 bottoms, forming a large convergence triangle. If the concept of the up-loss orders in the 4-hour chart is applied to the weekly chart, there will be more stop-loss orders under the three bottoms. Once the Fed announces an interest rate hike, Gold may usher a bigger crash. The target below is $1,453. Of course, apart from Powell, no one knows when the exact time of interest rates hike will be announced. That is a mid-to-long-term hypothesis, and it is worthy for us further investigate.


Hugo Leong Gold Analyst of Hantec Group

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