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David Becker

Gold prices moved sideways despite a selloff in riskier assets, as stocks headed south on fears of continued COVID-19 spread.  The dollar moved higher as risk aversion took hold. Treasury yields took a break from their recent climb, declining as riskier assets dropped. A weaker than expected September New Home Sales report weighed on yields, allowing gold prices to remain buoyed. Gold implied volatility which measures how much options traders believe the price will move remains elevated at 21% well off the highs seen in March near 55, but well off the average in 2019 which was closer to 13%.

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Technical analysis

Gold prices consolidated for the second consecutive trading session below resistance near the 10-day moving average at 1,904. Support is seen near the October lows at 1,872. Short-term momentum has whipsawed and turned positive after recently turning negative as the fast stochastic generated a crossover sell signal on the upper end of the neutral range. Medium-term momentum remains neutral as the MACD histogram prints in the black with a declining trajectory that points to consolidation.

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New Home Sales Declined More than Expected

US new home sales decreased by 3.5% to an annual rate of 959,000 units last month, according to the Commerce Department.  This followed a surge in August which was the highest pace of sales in 14 years of August. The data was weaker than expected as consensus forecasts were calling for a sales rate of around 1.025 million units. New home sales are a leading indicator as they are counted at the signing of a contract.

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