After failing to challenge the September high ($1735), the price of gold is trading down below the 50-Day SMA ($1718), and if it can't hold onto the October beginning range, it could continue to fall in the days to come.
Following the US Non-Farm Payrolls (NFP) report, the price of gold is still under pressure as longer-dated Treasury yields rise to new monthly highs. The precious metal is on track to test the monthly low ($1660) as it carves a succession of lower highs and lows.
The Consumer Price Index (CPI) update is expected to show the core rate increasing to 6.5% in September from 6.3% per year the month prior. Additionally, the Summary of Economic Projections (SEP) show a steeper path for US interest rates, which may keep the Federal Reserve on track to pursue a restrictive policy if persistent price growth continues.
In response, the price of gold may encounter difficulties before the next Federal Open Market Committee (FOMC) interest rate decision on November 2, as the CME FedWatch Tool indicates a greater than 70% probability for another 75bp rate hike. Additionally, bullion may largely resemble the price action from August as it struggles to hold above the 50-Day SMA ($1718), which it may do so by mirroring that price movement.
That being said, if gold fails to hold the opening range for October, it may continue to give back the gains from the yearly low ($1615) and may follow the negative slope in the moving average as it reverses ahead of the September high ($1735).
The current sequence of lower highs and lows has caused the price of gold to trade back below the $1670 (50% expansion) area, with the precious metal trading back below the 50-Day SMA ($1718) despite the unsuccessful attempt to test the September high ($1735).
As it seems to be following the downward slope of the moving average, gold may replicate the price action from August. If the monthly low ($1660) is not held, the price of gold may fall down towards $1648 (50% expansion), giving up the recovery from the yearly low ($1615).
The $1584 (78.6% retracement) region becomes accessible upon a break or close below the Fibonacci overlap around $1601 (38.2% expansion) to $1618 (50% retracement), with the April 2020 low ($1568) serving as the next area of interest.
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