Gold price analysis: how likely is a breakout in October?

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 Oct 3, 2021
  • Gold price movements have been rather subtle since January and may remain that way in the new month.
  • If bulls are unable to push the price past the resistance zone of $1,835, bears will remain in control.
  • Higher demand for riskier asses like crypto and stocks is weighing on gold price.

Gold price will likely remain within a horizontal channel in October. Bulls will need to push the price past the resistance zone of $1,835 to shift the sentiment.

gold price
gold price

Demand for riskier assets

The demand for gold has been rather disappointing over the past three quarters. One of the underlying factors is the notable shift by investors to riskier assets such as cryptocurrencies and stocks.

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In the previous year, Bitcoin – the leading cryptocurrency – recorded subtle price movements with $10,000 being its key resistance level. In the current year, it has surged by about 72.82%. Even at its lower support zone of $30,000, it has remained above 2020’s high.

At its current price of $48,917.18 the bulls are striving to retest the resistance level at $50,000. Although high price volatility is expected to continue defining the crypto market for the remainder of the year, it is likely for Bitcoin price to reach the year’s high of 64,822.10. At the same time, more investors have increased the stocks portion of their portfolio at the expense of precious metals like gold.

Concerns on inflation are also playing out in gold price movements. On the one hand, rising inflation has boosted the metal’s demand as a hedge against inflation. However, talks on the likelihood of earlier-than-expected rate hike will likely curb its gains in the new month. This is founded on the fact that high interest rate heightens the cost of holding the non-yielding bullion.

Gold price technical outlook

Gold price has been range-bound for the better part of the current year. Granted, it rose to 1,918.41 – it’s highest level year-to-date – in the second quarter. However, for the most part, the precious metal has been trading between 1,700 and 1,834.66.

On a daily chart, it is trading slightly below the 25 and 50-day exponential moving averages. Besides, it remains below the long-term 200-day EMA.

In the month of October, gold price will likely remain within the extended horizontal channel. In the immediate term, it may experience resistance along the 25-day EMA at 1,769.60. Above that level, September’s highs of 1,790 and 1,810 will be the resistance zones to look out for.

On the flip side, 1,750 and 1,700 will remain key support zones for the metal in the new month. Below the psychological level of 1,700, bears will be eyeing the levels of 1,677 and 1,650.

gold price
gold price
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