Gold price prediction amid the twist in precious metals’ dynamics

By: Faith Maina
Faith Maina
Faith strives to break down complex developments so investors can make better informed decisions. When Faith is not immersed… read more.
on Sep 29, 2021
  • Gold price remains under the crucial support level of $1,750 amid the strengthening US dollar.
  • Concerns over the Evergrande debt crisis have heightened its safe haven appeal.
  • Powell and Yellen have warned that failure to resolve the issue will have severe impacts.

Gold price has bounced off Tuesday’s low while remaining below the crucial support level of $1,750. A strong US dollar is the key driver of the ongoing downtrend.

gold price
gold price

Strengthening US dollar

Gold price downtrend in September is largely attributed to the strengthening greenback. The value of the US dollar tends to have an inverse correlation with precious metals.

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At the time of writing, the dollar index, which tracks the value of the greenback against a basket of six currencies, is at its highest level since November 2020. With an RSI of 77, it is in the oversold territory. The expected pullback will likely boost gold price towards the crucial resistance level of $1,750.

However, the precious metal’s price movements are not just about the typical dollar-gold dynamics. While the strengthening greenback is exerting pressure on the metal, the latter entity is finding support in its safe-haven appeal.

There are ongoing fears regarding Evergrande’s unresolved debt crisis. Indeed, some investors are of the opinion that this is an initial signal for greater troubles in the Chinese real estate industry and other economic sectors. Subsequently, it could culminate into a global selloff that is comparable to the 2008 financial crisis. On Wednesday, Treasury Secretary, Janet Yellen and Fed’s Chair, Jerome Powell warned that failure to resolve Evergrande’s crisis would have far-reaching and several outcomes.

Gold price technical outlook

Gold price has bounced off Tuesday’s low when it dropped to its lowest level since mid-August. At that level, it was at the periphery the oversold territory with an RSI of 31.  

At the time of writing, the precious metal was up by 0.31% at 1,739.42. Since hitting the month’s highest level of 1,834.40, it has dropped by about 5.29%. On a two-hour chart, it is trading slightly below the 25 and 50-day exponential moving averages with an RSI of 44.

In the short term, gold price will likely remain below the crucial support level of 1,725. From this perspective, it will likely trade within a tight range of between Tuesday’s low of 1,727.88 and Wednesday’s high of 1,745.64. With enough bullish momentum, the price may move higher to find resistance at the crucial support zone of 1,750.

gold price
gold price
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