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Gold Price Prediction: XAU/USD to fall below $1,660 as DXY strengthens and US Inflation is eyed

Daniel Rogers

Oct 11, 2022 14:28

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In early Asia, the gold price (XAU/USD) is exhibiting erratic movements below $1,670.00. The precious metal is anticipated to exhibit extreme volatility if it breaches the support level of $1,660.00 as the risk-off profile intensifies in response to Russia's military attacks on Ukraine. After breaking the Crimean bridge in Russia that serves as a supply route for Russian forces in southern Ukraine, Russia has escalated its missile attacks against Kiev.

 

In the meantime, the US dollar index (DXY) has strengthened in response to the gloomy market sentiment and established itself solidly above the round-level barrier of 113.00. Monday was a holiday in the United States, but S&P500 futures remained extremely volatile due to unfavorable market sentiment.

 

This week, the mega-event of US inflation data will provide clear direction for the future. Gasoline price declines have resulted in a reduced consensus for the US inflation rate. The economic statistics is estimated to be 8.1% lower. While core inflation, which excludes oil and food costs, is estimated to be 6.5% higher.

 

According to the CME Fedwatch tool, there is a greater than 78% chance that the Federal Reserve (Fed) will announce a fourth consecutive rate hike of 75 basis points (bps).

 

On an hourly basis, gold prices have fallen below the 50% Fibonacci retracement at $1,672.61 and are approaching the 61.8% Fibonacci retracement at $1,658.90. Around $1,690.00, the 50-period and 200-period Exponential Moving Averages (EMAs) have formed a death cross, which strengthens the downward filters.

 

In addition, the Relative Strength Index (RSI) (14) has moved into the negative zone between 20.00 and 40.00, indicating further weakness ahead.

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