Gold Shines Against US Dollar Amid Crypto Market Crash

Gold Shines Against US Dollar Amid Crypto Market Crash

Will the price of gold continue to rise? It may depend on the sell-off of the US dollar.

The US dollar has fallen since hitting a high on September 28 at around 114.78. However, the sell-off gained momentum on Friday as rumors surfaced that China would be winding down or even ending its zero-covid policy, which it has adhered to since the start of the pandemic in March 2020. China officially denies ending zero covid policy; however, markets remained hopeful as China lowered the quarantine for people entering the country. On Friday, DXY hit a daily high of 112.99. However, by the end of trading on Tuesday, the US dollar index hit a low of 109.37, testing the lows since September 20.

Daily chart of the DXY dollar index

Source: Tradingview, Stone X

Additionally, the cryptocurrency markets experienced turmoil on Tuesday as cryptocurrency exchange FTX faced liquidity issues and was eventually bought by rival Binance. Cryptocurrencies like Bitcoin and Ethereum sold off aggressively, with Bitcoin hitting a 2022 low.

Bitcoin (BTC/USD) daily chart

bitcoin crypto forex 10112022bitcoin crypto forex 10112022

After the sell-off of cryptocurrencies, many traders feared that other markets, such as stocks, would be affected by the contagion.

Gold was the beneficiary of Friday’s USD sell-off and Tuesday’s crypto sell-off as traders placed funds in a safe-haven asset. Gold has been falling in an ordered channel since March after testing all-time highs of 2075.11 in August 2020. The precious metal returned to the 50% retracement level from August 2018 lows to August 2020 highs. August 2020 levels near 1617.68. Since September 28, gold has tried to break through the support level three times, but failed each time. The last time the price tested this level was on Thursday, November 3, the day before the collapse of the US dollar. Since then, gold has gained almost $100 and is testing the 100-day moving average at 1716.21.

GOLD (XAU/USD) daily chart

gold gold xau/usd 10112022Source: Tradingview, Stone X

The 100-day moving average is converging with a 50% retracement from Aug 10 highs to Nov 3 lows around 1712.31. The next level of resistance lies at the 61.8% Fibonacci retracement of the same time frame and horizontal resistance around 1735. Above this, gold could move towards 1807.91, above the highs of 25 August. However, note that the RSI below is in overbought territory and is pointing down. This is a sign that the price may have risen too much in a short period of time and may be ready for a correction. First support is at Monday’s high at 1682.13. Below, the price could drop to the Nov 3 low at 1616.71 and then the recent upper down channel trendline around 1590.

GOLD (XAU/USD) 4-hour chart

November 11, 2022Source: Tradingview, Stone X

Will the price of gold continue to rise? It may depend on the sell-off of the US dollar. The US CPI will be released on Thursday. If it is higher than expected, the dollar can be bought and gold sold (and vice versa). Also, if we see a decline in cryptocurrencies, traders will look for a safe haven in gold, which will continue to push the precious metal higher.

Joe Perry, CMT, » Official site stock exchange fomc

Disclaimer: The information and opinions contained in this report are for general information only and do not constitute an offer or solicitation to buy or sell any currency contracts or CFDs. Although the information contained herein has been obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness and accepts no liability for any direct, indirect or consequential damages that may result from anyone relying to such information.

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