#Gold WTI Oil Forecast: GOLD Pulls Back as US dollar Rallies| WTI Testing the 50-Day EMA (6 OCTOBER 2022)

Gold Forecast: Pulls Back as US dollar Rallies

There is a huge negative correlation between gold and interest rates, as well as the US dollar.

• The gold market pulled back a bit during the trading session on Wednesday as the market sliced through the 50-Day EMA.
• All things being equal, the market also has paid close attention to the $1725 level, an area that had been important a couple of times in the past.
• However, it is much more likely that the reaction had a lot to do with the US dollar rallying during the day, and of course interest rates rising.

There is a huge negative correlation between gold and interest rates, as well as the US dollar. It’s much easier to hold paper than it is to pay for storage of metal, and I think that’s essentially what you are seeing here. Furthermore, there is a downtrend line that sits just above, and it does look like it is offering a little bit of psychological resistance if nothing else.

Volatility Ahead

At this point in time, I think the market got far too ahead of itself as a lot of people had inferred from the Reserve Bank of Australia only raising 25 basis points that perhaps central banks were going to pivot. However, last night we had seen the RBNZ go ahead and raise 50 basis points, suggesting that the economy is not necessarily starting to make central banks pivot. After all, Australia has a much larger part of its economy that is directly exposed to the housing market, so therefore interest rates are a bigger deal there.

The gold market will continue to look at the $1680 level as an important area, as it was a major support level going back several years. However, we have sliced through a couple of times, and sometimes you see this, as a recovery sees a bit of a “throw over” in this situation. The market has gone back and forth quite violently over the last couple of days, so I think we are just trying to build up enough momentum for the next move. With this being the case, I think it’s probably only a matter of time before we see volatility make something break, and in this general pattern, you quite often see the market roll over quite drastically. I have no interest in buying this market, at least not until the US dollar changes its longer-term attitude and momentum.

WTI Crude Oil Forecast: Testing the 50-Day EMA

Keep in mind that the 50-Day EMA has crossed below the 200-Day EMA a couple of weeks ago, which of course is known as a “death cross.”

• The WTI Crude Oil market rallied a bit during the day on Wednesday to test the 50-Day EMA.
• The 50-Day EMA quite often is followed by longer-term traders as a trend defining indicator, and we look at the chart you can see that the 50-Day EMA looks as if it is behaving like a downtrend line.
• It has been tested multiple times over the last couple of months, and therefore it makes quite a bit of sense that we would see the indicator continue to cause headaches for the buyers.

However, the meeting during the session on Wednesday involving OPEC + could have a major influence on what happens next. There are rumors out there than the meeting is going to see 2 million barrels pulled off the market every day as far as production is concerned. If that’s the case, then it should put upward pressure on the price, but one would have to think that the market has already priced most of that end.

Volatility Ahead

Alternately, if the market were to pull back from here in reaction to a less than 2 million barrel per day announcement, then we would continue the overall downturn. The $80 level underneath could be important, as it is a large, round, psychologically significant figure, and an area where we’ve seen a lot of action at previously.

Keep in mind that the 50-Day EMA has crossed below the 200-Day EMA a couple of weeks ago, which of course is known as a “death cross.” This is longer-term very signal, so it does suggest that there is a lot of selling pressure and negativity out there. I do not necessarily think that this is the end of the downtrend in oil, because a lot of people will be looking at this through the prism of demand destruction as well, especially considering that the global economy is almost certainly going to go into a slow down, so I think demand is almost certainly dropping. In that scenario, OPEC will be somewhat limited in what it can do. Regardless, the next couple of days should give us an idea as to where we are going over the longer term. Given mind that oil does tend to be very volatile, and of course a lot of rumors get leaked to manipulate the market.

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