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- Gold price moves back above $2,750 level, closer to all-time peak
Gold price moves back above $2,750 level, closer to all-time peak
- Gold price catches fresh bids on Tuesday amid Middle East tensions and US election jitters.
- Bets for smaller Fed rate cuts remain supportive of elevated US bond yields and the USD.
- A positive risk tone might further contribute to capping the XAU/USD ahead of US data.
Gold price (XAU/USD) ticks higher during the Asian session on Tuesday and moves closer to the top end of a short-term trading range held over the past week or so. Against the backdrop of safe-haven demand stemming from Middle East tensions and US election jitters, subdued US Dollar (USD) price action is seen as a key factor offering support to the commodity. However, bets for a less aggressive policy easing by the Federal Reserve (Fed) continue to act as a tailwind for the buck and hold back bullish traders from placing fresh bets around the non-yielding yellow metal.
Apart from this, the underlying bullish tone across the global equity markets contributes to capping the upside for the Gold price. Investors also seem reluctant and prefer to move to the sidelines ahead of this week's important macro releases from the US – the Advance Q3 GDP print, the Personal Consumption Expenditures (PCE) Price Index and the Nonfarm Payrolls (NFP) report. The crucial data will play a key role in influencing market expectations about the Fed's rate-cut path, which, in turn, will drive the USD demand and provide a fresh directional impetus to the XAU/USD.
Daily Digest Market Movers: Gold price continues to attract haven flows amid geopolitical risks and US political uncertainty
- Retreating US Treasury bond yields triggered an intraday US Dollar pullback from its highest level since July 30 and assisted the Gold price in attracting some dip-buyers near the $2,725 region at the start of an eventful week.
- The recent upbeat US macro data dampened hopes for another jumbo rate cut by the Federal Reserve, which should act as a tailwind for the US bond yields amid deficit-spending concerns after the November 5 US election.
- With the US presidential election approaching, Vice President Kamala Harris and the Republican nominee Donald Trump are caught in a knife-edge battle to the White House, adding a layer of uncertainty in the markets.
- The US warned Iran at the United Nations Security Council of severe consequences if it undertakes any further aggressive acts against Israel in retaliation to the latter's strikes on military targets across Iran over the weekend.
- China's gold consumption in the first three quarters of 2024 slid 11.18% from the same period a year ago as high prices dented buying interest for jewelry products, the state-backed gold association said on Monday.
- Investors now look to Tuesday's US economic docket – featuring the release of the Conference Board's Consumer Confidence Index and Job Openings and Labor Turnover Survey (JOLTS) – for short-term opportunities.
- This, along with a string of US economic data due this week, should provide cues about the Fed's interest rate outlook, which will influence the USD price dynamics and provide a fresh directional impetus to the XAU/USD.
Technical Outlook: Gold price could aim to challenge a multi-month-old ascending trend-line hurdle near the $2,770-2,775 area
From a technical perspective, acceptance above the $2,750 supply zone could be seen as a fresh trigger for bullish traders. The subsequent move up could lift the Gold price beyond the all-time peak, around the $2,759 region, towards testing a nearly four-month-old ascending trend-line resistance near the $2,770-2,775 region. The momentum could extend further towards the $2,800 round-figure mark.
That said, the Relative Strength Index (RSI) on the daily chart is on the verge of breaking into the overbought territory and warrants some caution for bulls. Hence, it will be prudent to wait for some near-term consolidation or a modest pullback before positioning for any further near-term appreciating move.
Meanwhile, any corrective pullback now seems to find some support near the overnight swing low, around the $2,725 region, ahead of the $2,715 zone. The latter marks the lower boundary of the one-week-old range, which if broken decisively might prompt some technical selling. The Gold price might then weaken further below the $2,700 mark, towards the $2,675 area en route to the $2,657-2,655 horizontal support.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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