Technical analysis: Gold Mid-term outlook remains range bound November 8, 2021 209

  • The Federal Reserve has confirmed the start of the tapering process this month. The amount of asset purchases will be reduced by US$15bn and aims to finish the process by mid-2022.
  • Interest rates is still capped at near zero at 0.25%. The nearest rate hike is speculated to be brought forward to early 2023. As such, Gold will face further correction from the high of US1,860-US$1,884 region and a major rebound will happen at the lower boundary of US$1,600.
  • US dollar is likely to find strength in the tapering process. Short-term target at 96.44.

Observing what happened during the taper tantrum in May 2013 and the taper speculation talk in September 2021. There is a resemblance in how the momentum increased in asset purchases both in 2013 and present day is despite a soaring inflation which happen this year. As such, we believe that the Fed’s resolve to finish its round of taper by mid-2022 is clear.

Dollar Index has successfully broken the major resistance level at 92.00. With recent ascending triangle formation spotted, there is a potential upside above the resistance zone 1 at 94.3-94.7. Mid-term target is looking at 98.23 and 100.36. Which is 161.8% and 200.00% Fibonacci extension level of 89.20-94.78.

Looking back in 2014 and 2015, Gold’s break to the upside of the falling wedge was confirmed only after the Federal reserve had their first-rate hike by 25bps in 2015 October. Likewise, with the rate hike estimated to be in early 2023, the upside will only confirm when rate hike is announced. Tapering in 2014 has pushed Gold lower nearing US$1,000 support before a rebound. Present technicals also indicate Gold is looking to test US1,615-US$1,559 major support zone.

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Profile photo of Chua Wei Ren

Chua Wei Ren
Technical Analyst
Phillip Securities Research Pte Ltd

Wei Ren specialises in Technical Analysis and has 11 years of experience in studying classic technical price action. He also study and research extensively on Elliott wave theory, Dow Theory. He believes that history plays an important role in how the market is reflected in the future.

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