Gold's rise started after the last Fed meeting during which the rate was expectedly raised by 75 bps. Since then gold has risen 5.5%, which is average for the current bearish cycle.
U.S. inflation data for October will be released today and is expected to be higher than it was in September (MoM). Amid the rise in oil prices in October, we assume that inflation will indeed turn out higher than expected. In that case the Fed will be forced to raise rates even more, which will have a negative impact on the price of gold.
Average oil price in October
There is no doubt that the results of U.S. midterm elections will influence gold price. According to preliminary results, the Republicans will win fewer seats than previously expected. The stock markets will react to the event with decline and gold may also show downward trend because in such case the U.S. political and economic course will remain the same.
As of now, the gold is consolidating at $1700. Apparently, there will be a movement after the news on inflation and the announcement of the midterm election results.
Technically, the current point combines several factors for a reversal:
1. On the chart we can see the bearish hammer candlestick pattern, which indicates a possible reversal.
2. The price has rebounded from the Fibonacci level of 23.6. Earlier we see that it has already been a test of this level.
3. The reversal takes place under the 100-day moving average, which has already been a resistance for the gold this year.
Therefore, right now there are more factors for the gold's decline towards its lows than for its rising trend. If you go short, the target might be the lower boundary of the emerging $1620 flat. If the rally from the current point continues, the gold might need to go above the Fibo level of 23.6 and cross above the 100-day moving average. If that happens, we cancel the downside scenario. A stop can be placed at the level of $1730.
In the short term, it is worth considering opening short positions in gold.
Take profit 1 - $1620 (green lines on the chart)
Stop loss - $1730 (red line on the chart)