Gold steadies at fresh highs on uncertainty ahead of US presidential election

• Gold hits fresh record highs on increasing demand for safe havens amid the US political uncertainty.
• US Treasury yields’ reversal from mid-term highs has increased bullish pressure on the precious metal.
• XAU/USD rally looks overextended, with the RSI showing a bearish divergence.

Gold price (XAU/USD) has stretched to fresh record highs on Wednesday, favored by a combination of higher demand for safe-haven assets amid the US political uncertainty and retreating US Treasury yields.

Investors are looking for safety with the US presidential election around the corner and recent polls showing a close race between the two candidates Vice President Kamala Harris and former President Donald Trump.

Beyond that, US Treasury yields pulled back after JOLTS Job Openings data declined by more than expected in September. The Federal Reserve (Fed) has set the labor market as the main focus of its monetary policy, and these figures have practically confirmed a 25 bps rate cut next week.

Daily digest market movers: Gold consolidates gains with investors pricing two more Fed rate cuts in 2024 

• US JOLTS Job openings declined to 7.44 million in September, and August’s reading was revised down to 7.86 million from the previously estimated 8.04 million. These figures have scratched the picture of a solid labour market ahead of Friday’s Nonfarm Payrolls (NFP) report.
• On the other hand, the Conference Board’s Consumer Confidence Index improved to 108.7 in October from 98.7 in September, beating expectations of a 99.5 reading.
• The CME Group’s Fed Watch tool shows a 99.6% chance of a quarter-point rate cut by the Fed next week, up from 92% on Tuesday. The chances of another 25 bps cut in December have increased to 76.6% from 72%.
• US 10-year Treasury yields retreated from three-month highs at 4.33% to 4.23% on Wednesday, which has provided an additional impulse to the precious metal.
• The main focus on Wednesday is the advanced US Gross Domestic Product (GDP) report, which is expected to show a healthy 3% annualized growth in Q3. The ADP Employment Change, however, is seen declining to 115K from 143K, which might increase doubts about Friday’s Nonfarm Payrolls (NFP) report.

Technical analysis: XAU/USD’s rally looks overstretched near $2,800

Gold is on a bullish trend amid a supportive fundamental backdrop, but the technical picture is showing signs of a potential correction. The RSI is at overbought levels in most time frames, with the 4-hour chart showing a bearish divergence, which often anticipates a corrective reaction.

Immediate resistance is the intra-day high at $2,780, ahead of the $2,800 level. Support levels are the previous top at $2,760 and $2,730.

The daily chart shows the pair likely to be at the end of a 5-wave (Elliot Wave) impulse, with the 261.8% retracement of the 4th wave, in the $2,800 area, as a potential pivot point.

XAU/USD Daily Chart