"Bullish" Momentum Diminishes Amid China's Economic Stimulus Package Announcement and Fed Rate Cut Expectations
Gold prices are seen struggling to gain strong upward momentum following the announcement of China's economic stimulus package.
Expected increased demand from China, which is the world's largest consumer of gold, has boosted the prospects of this precious metal.
Nevertheless, the attractiveness of gold as a safe-haven asset is expected to be affected due to the growing confidence of investors in the economic recovery package driven by stimulus initiatives from China.
Although the above is seen to allow for a reduction in demand for the gold market, gold demand is still expected to be supported by a broader increase in demand in the global equity market following the expectation that the US Federal Reserve is expected to reduce interest rates by 50 basis points this November.
The expected easing of monetary policy is seen to be able to weaken the US dollar and reduce market demand for US Treasury bond yields, this is seen to be able to create a more conducive environment for non-yielding assets such as gold.
Fed Policy and Risk Sentiment Influence Gold's Short-Term Trajectory
Looking ahead, the absence of major economic data reports from the US in the near future is expected to influence gold traders to focus fully on the speeches from several Fed committee members scheduled to take place throughout the week.
Furthermore, market players will pay special attention to the conference by Fed Chairman Jerome Powell, which is scheduled to take place at the US Treasury Market Conference in New York this week.
His speech will be closely watched for any signal on the future direction of the monetary policy plan, which could have a significant impact on gold prices.
Technical Analysis of Gold Price: Potential "Correction" is Getting Closer
From a technical perspective, gold is now in "Overbought" status based on the daily chart, allowing a "Correction" to be triggered.
If "Buyers" regain control of the market, a significant move above the critical price level of $2,687 is required to open the potential for further upside around the $2,700 price level.
But if on the contrary, any "Correction" in the gold market, the price can retest to the price level of $2,633.
A continued decline below this level is seen as potentially a more drastic decline, the $2,600 price level is expected to be the next "Support" level before the $2,580 & $2,559 levels are tested.
