Summary:

• Gold prices have dropped some $20 in the past 24 hours
• Rise in USD also seen as Fed chair comes into focus
• Industrial production shows little ill-effects of hurricanes

One of the biggest movers in the last 24 hours has been gold with the market tumbling and shedding some $20 since this time on Monday. The fall has seen price plummet back through the $1300/oz level and in doing so wipe out the large gains seen following Friday’s disappointing US CPI data. 

According to the 8 and 21 period EMAs the market remains in a downtrend after there was a negative cross around a month ago. There had appeared to be a chance for a negation of this sign and a positive cross with last week’s gains but the last two days of selling have put paid to that. There is little by the way of swing levels to look for support underneath until 1268 but if price breaks below there then the possibility of steeper declines back towards 1205 becomes greater. Alternatively a break above 1305 would be a clear positive development and could well be accompanied by a positive cross in the EMAs and signal an end to the current downtrend. 

 Gold has declined sharply in the past two days and remains in a longer term downtrend. Source: xStation

The USD has been rising today, adding to the downward pressure on Gold. The buck is in fact gaining against all of its peers barring the Mexican peso and a rise in the greenback weighs on the price of Gold. 

 The rise in the USD has contributed to the drop seen in Gold. Source: xStation

There is no definite cause for these moves although an increasing amount of rumour surrounding the next Fed chair could well be a contributing factor. Around the time that Gold began to sell yesterday evening, there were reports that US president Trump had been impressed with John Taylor during an interview last week. Several people familiar with the matter said that Trump gushed about Taylor following his interview and with the Stanford university economist seen to be hawkish this could be seen as a factor in the recent rise in the US dollar and drop in Gold. The so-called Taylor rule was was created by John in the 90s and it would generally advocate higher interest rates than those seen in recent years.   

It’s a quiet day in the US on the data front with the industrial production figure the main event. The reading rose by 0.3% m/m which was inline with the expected but the prior reading was revised higher to -0.9%. With the data relating to September there is little sign here of a slowdown following the hurricanes that wreaked damage on the US, and the uptrend seen in recent years appears to be in tact. The economic indicator still lags the ISM manufacturing reading but is suggestive of a fairly healthy level of activity.

 The US industrial production rose in September showing few ill-effects of the hurricanes. Source: XTB Macrobond