On Wednesday (October 16), during the Asian market session, spot gold maintained its intraday rebound trend after a significant rise the previous day, with the gold price currently hovering around $2,668 per ounce. Valeria Bednarik, Chief Analyst at FXStreet, wrote an article analyzing the technical outlook for gold.
Gold prices rose in the previous trading session, approaching the weekly high, not far from the record high of $2,685.45 per ounce set in September.
On Tuesday, due to the New York State manufacturing activity performing much worse than expected, the benchmark 10-year U.S. Treasury yield fell, which propelled spot gold to surge nearly $15 that day.
The New York Fed reported on Tuesday that the New York State October manufacturing index was -11.9, a sharp decrease of 23.4 points from September, significantly lower than the market's general estimate of 3.0. This index measures the percentage difference between companies reporting expansion and those reporting contraction.
Spot gold closed higher by $14.10 on Tuesday, with a gain of 0.53%, at $2,662.60 per ounce; the highest price during the trading session touched $2,668.95 per ounce.
There is room for gold prices to expand their gains, with gold bulls seeking to set a new historical high.
The geopolitical situation provides support for gold prices. Two Israeli officials said on local time October 15 that although Israel's attacks on Iran are not expected to target nuclear and oil facilities, they may include missile and drone launching devices, warehouses, factories, Iranian military bases, government buildings, and other targets.
In the security consultations participated by Israeli Prime Minister Netanyahu, Defense Minister Gallant, and other ministers, a comprehensive consensus has been reached on the action guidelines, possible timing, and response strength towards Iran, but the specific implementation of this action still requires the final approval of the cabinet.
On October 16, the latest statement from an informed source in Iran stated that any attack or aggression by Israel against Iran will be considered an act of war, and Iran will respond strongly.
On October 15, Jabari, the adviser to the commander of the Islamic Revolutionary Guard Corps of Iran, warned that the United States should not take any "foolish actions" against Iran, as U.S. ships and military bases are all within the range of Iran's weapons.Gold's Short-Term Technical Outlook
The daily chart for gold indicates that buyers are defending the gold price near the bullish 20-day Simple Moving Average (SMA), which is currently around $2638 per ounce. The 100-day SMA and the 200-day SMA are also trending higher at levels significantly below the aforementioned short-term moving averages, consistent with a bullish dominance. Lastly, the momentum indicator is hovering around the 100 line, while the Relative Strength Index (RSI) is modestly rising to around 62, also supporting the bullish case.
Recent trends show limited upward momentum, but the risk for the gold price remains skewed to the upside. The gold price is trading above the flat 100-period SMA, and the 20-period SMA is currently crossing above the former, reflecting increasing buying interest. Technical indicators have lost upward strength but are well maintained above the midpoint. Overall, there is a possibility for gold prices to reach new record highs, especially if the gold price can hold above the $2638.00 per ounce level.
Bednarik provides the latest key support and resistance levels for gold prices:
Support levels: $2654.90 per ounce; $2638.00 per ounce; $2625.40 per ounce
Resistance levels: $2673.10 per ounce; $2685.45 per ounce; $2700.00 per ounce