XAU/USD Analysis: India Increases Imports

By RoboForex analysis Department

The primary event in the gold market this month revolves around the decision of the US Federal Reserve concerning the interest rate. The index is expected to remain unchanged. However, amid surging consumer inflation, the regulator might announce a new interest rate hike before the end of the year. This is likely to result in an increase in the yield of US Treasury bonds. Notably, the volatility in the market for these securities has exceeded that in the gold market for the first time in 45 years. Gold is traditionally viewed as a safe haven asset, serving as a hedge against inflation for significant institutional investors. Nevertheless, owing to the attractive yields of government bonds, gold does not wholly serve this purpose.

Conversely, the issue of the substantial balance sheet of the US Federal Reserve remains unresolved. The regulator is striving diligently to reduce it, but achieving this in the near term is uncertain. This contributes to inflation in goods, commodities, and precious metals. Furthermore, India, the world's largest gold importer, significantly escalated its gold acquisitions by 41% to reach 4.94 billion USD in August. On an annual basis, Indian demand surged by 39%. Prior reports indicated that major central banks worldwide are actively amassing gold for their reserves.

Given this backdrop, robust fundamental factors are favouring the prolonged growth in the price of gold. However, the current stance of the US Federal Reserve hinders this trajectory, with these dynamics visible on the technical analysis chart.

Technical Analysis Of The XAU/USD Pair

On the D1 timeframe, there is a support level at 1903.96, while resistance stands at 1948.98. At the time of writing, quotes have secured above the historic level of 1923.44. The potential for continued appreciation in the price of an ounce of gold towards 1975 is evident.

On H1, there is a descending trend. Speculative intraday sales can be considered within the range of 1927.50 to 1918.50. If quotes return to the level of 1923.44, it is likely that purchases with a target of 1948.50 might materialise.

In the event that the level of 1903.96 is breached, it becomes probable that gold's value could decline to the 1886.20 mark. In this scenario, sales could start with a new rebound from the existing D1 support. Subsequently, a new broad channel might form in this timeframe.

Disclaimer

Any forecasts contained here are based on the author's particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.