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Drop in Demand for the Metal is a Catalyst for Lower Quotes

11/22/2022 12:41 PM

Quotes of the XAU/USD pair are correcting in a downtrend, trading at around 1744.00.

The instrument completed an upward correction and again moved to a decrease against the backdrop of alarming data from China, where deaths of citizens infected with coronavirus were recorded over the weekend. One of the largest industrial centers of the country, Guangzhou, has already been quarantined, and fears that the Chinese authorities may again go for a complete lockdown of the country are growing, which could threaten a temporary loss of the largest market for gold.

The fact that China is the most important link in the chain of mining and processing of the precious metal is also confirmed by data from gold processing centers in Switzerland. In October, the country exported 159.57 tons of gold, of which most (43.7 tons) went to China. This is slightly less than the September figure of 44.02 tons and reflects a slight drop in demand caused by the quarantine of some Chinese regions. The second place in supplies from Switzerland is still occupied by Turkey, which received 31.4 tons in October, which is lower than 32.2 tons, which were delivered in September, and again demonstrates a local decrease in demand for metal.

The negative sentiment of investors is also confirmed by data on demand for exchange-traded gold contracts from the US Commodity Futures Trading Commission (CFTC). Last week, sellers significantly increased their positions in all categories. In the structure of producers, the growth of short positions amounted to 20.879 thousand against the outflow of 1.133 thousand from the "bulls", and in the structure of swap dealers it amounted to 27.801 thousand against the reduction in the positions of buyers by 3.287 thousand.

On the daily chart of the asset, the price has left the limits of a wide downward channel and is still trying to return to the resistance line in order to retest.

Technical indicators hold a buy signal, but are already hinting at a correction: fast EMAs on the Alligator indicator are approaching the signal line, and the AO oscillator histogram is forming new descending bars trading in the buy zone.

Support levels: 1725.0, 1665.0. | Resistance levels: 1780.0, 1850.0.

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