【Evening Session】 Gold has suffered a short-term setback, but its long-term logic remains intact

Gold:

Overnight, gold recorded its biggest one-day drop in more than a decade. The December gold futures on the New York Mercantile Exchange closed at $4,109.10 per ounce, down 5.7%. However, from a broader perspective, the logic for gold's rise remains intact, and it is premature to say that gold has peaked in the short term.

The overnight decline was most likely the result of extreme sentiment. Trump's new tariffs have been unanimously opposed both domestically and internationally. On August 29, the US Court of Appeals for the Federal Circuit ruled that the law Trump cited when approving tariffs on multiple countries did not grant him the power to impose taxes, meaning that there is still a significant chance for a turnaround on the tariff issue. At the same time, it has been confirmed that China and the US will hold a new round of negotiations, easing market risk aversion. Many long positions that had made substantial profits chose to close their positions, causing a stampede effect and a sharp short-term drop.

Peng Cheng, a market strategist at Zhisheng Research(exclusively invited by Plotio), believes that the foundation for gold's rise still exists, such as interest rate cuts and the end of balance sheet reduction, as well as the dollar crisis. These are all driving forces for funds to flow into the gold market. There are no more signals to prove that the long-term upward trend has ended.

Technical analysis: The daily chart of gold closed with a large bearish candle, forming a bearish engulfing pattern. However, the short-term deviation is too large, suggesting a possibility of correction. The 4-hour chart has formed a double top and broken down, indicating a potential retest of the neckline level within the day. In the short term, one can pay attention to the resistance at around $4,186.

Crude Oil:

Overnight, oil prices rebounded slightly. There are signs of a bottoming out in the medium-term trend, but due to the weak fundamentals, the upward space for crude oil may be very limited. For medium-term operations, it is best to focus on short positions.

The oversupply of crude oil is a huge burden. Recently, the International Energy Agency (IEA) raised its forecast for the global crude oil oversupply in 2026, expecting it to be unprecedented. The agency stated that global crude oil supply will exceed demand by nearly 4 million barrels per day next year, which will be unprecedented on an annual scale.

Given the reality of oversupply, the U.S. Energy Information Administration (EIA) recently issued a bearish forecast for oil prices, expecting them to fall sharply in the coming months. The supply side not only has increased production from OPEC+, but non-OPEC+ countries also maintain stable crude oil production, such as the United States, where the average crude oil production this year has reached a record 13.4 million barrels per day. However, the problem lies in weak demand, where the growth in demand cannot keep up with the growth in supply.

Technical analysis: The daily chart of crude oil shows a small bullish candle, which envelopes the previous trading day's bearish candle, suggesting that the medium-term decline may have halted. The 1-hour chart shows a rising low and a rising center of gravity, with the price entering the previous trading range. The short-term trend has reversed. Within the day, attention can be paid to the support level of $57.50.  

U.S. Dollar Index :

Recently, the performance of the US Dollar Index has been lackluster, and the rebound may have ended. The overall pattern is quite unfavorable. At present, it might just be a pause in the dollar's decline, and there is still a large potential for further depreciation.

In early August this year, investment banks such as Citigroup, Goldman Sachs, and Morgan Stanley analyzed the US dollar from multiple dimensions including valuation, trade deficits, and interest rate differentials, and concluded that the long-term logic of the dollar's decline holds. Goldman Sachs pointed out that the real trade-weighted exchange rate of the US dollar is still 15% higher than its long-term average. Morgan Stanley emphasized that policy uncertainties such as changes in the leadership of the Federal Reserve also add downward pressure on the dollar.

Judging from the recent remarks of Federal Reserve officials, a rate cut is almost certain. In extreme cases, a 50 basis point rate cut in October cannot be ruled out. The latest market forecast shows that the probability of a 25 basis point rate cut by the Federal Reserve in October is 99.4%, while the probability of maintaining the interest rate unchanged is 0.6%. The probability of a cumulative 50 basis point rate cut by the Federal Reserve in December is 98.6%, and the probability of a cumulative 75 basis point rate cut is 0.9%.

Technical analysis: The daily chart of the US Dollar Index closed with a small bullish candle, but the upward momentum was clearly hindered, with the previous high point exerting significant pressure. There is a possibility of a bearish continuation pattern forming. The 4-hour chart closed with a shooting star pattern, suggesting that the short-term rally may have ended. The short-term and medium-term trends may converge, and the index could potentially test the 98.50 level.

Nikkei 225:

The Nikkei 225 closed with a small bullish candle on the daily chart, with the moving averages in a bullish alignment, indicating a clear upward trend. On the 4-hour chart, it closed with a hammer candle, suggesting that the short-term correction is likely complete. There is a high probability of short-term consolidation and upward movement. Within the day, attention can be paid to the support level at 49,130.

Copper:

The daily copper price chart has been showing a series of small bearish and bullish candles, but the price center has not shifted downward. The long-term moving average provides a clear support, suggesting a potential formation of an ascending continuation pattern. The 1-hour cycle's downward structure has been completed, and the price has re-entered the previous high-density trading area. There is a high probability of short-term consolidation and upward movement. For the day, pay attention to the support at around $4.88.

22 October Market Snapshot：

1.The Trump administration is preparing to launch a drug investigation, paving the way for new tariffs, which may reignite global trade tensions.

2.Most economists believe that the Bank of Japan will raise the key interest rate in October or December; nearly 96% of economists expect that by the end of March next year, Japan's borrowing costs will rise by at least 25 basis points.

3.India and the United States are about to reach a trade agreement to lower punitive tariffs, which may reduce the current punitive tariffs on Indian exports from 50% to 15% to 16%.

22 October Key Data/Events Preview：

1.20:25, ECB President Lagarde will deliver a speech at the Frankfurt Finance and Future Summit.

2.22:30, the EIA crude oil inventory for the week ending October 17th will be released. The market expects the inventory to increase by 1.205 million barrels.

[Important Disclaimer:The above content and views are provided by Zhisheng, a third-party cooperative platform, for reference only and do not constitute any investment advice. Investors who trade based on this information shall bear their own risks.]

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