By Gold prices fell to $1633 by the beginning of this month, which was similar to the lows seen in September and October. However, gold prices have since increased by around 1% and have risen above $1650.
A comparable buying spree occurred the month before, and such buying behaviour seems to point to an uptrend reversal.
Still, given the current situation, it’s best to wait until the price goes over $1700, which will show that things are getting better.
Some investors see the prices of gold at the edge of the bear market (-20% of the peak) as good opportunities to buy for the medium to long term. This is called “buying the dip.” This happens at the same time because central banks are each sending signals that they are slowing down their rate hikes.
Gold is trading lower than its 200-week moving average, which is typically a negative sign and can be seen on weekly charts.
However, seasoned investors must have seen that in 2016 and 2018, the price struck a local bottom approximately five weeks after going below that level, just like it is doing so now. This is consistent with what is happening right now.
However, given the circumstances, it seems that the best course of action would be to wait.
Based on the results of the technical analysis, buyers with a medium-term time horizon should wait until the price rises above $1700 and returns to the area above the 200-week moving average.
Additionally, long-term buyers of gold would be wise to wait for official signals from the Federal Reserve that it will slow the pace of rate hikes before making a purchase.
There is still a chance that it will not happen this coming Wednesday, despite the apologies that the speakers and the media have made to soften the call. This is due to the fact that the Fed has already surprised many people with its hawkishness during the course of the summer months.
In spite of the dangers that were mentioned before, we believe that the most likely outcome will still involve a reversal in the price of gold in response to a shift in the level of discourse.
A similar change, but in the opposite direction, happened in March 2022, when the Federal Reserve started to “surprise” the markets by talking more and more like hawks. This caused the markets to move in the opposite manner.
