Gold price is currently trading with a negative bias for the second straight day, with the USD strengthening and reducing bets for a 50 bps Fed rate cut in November. Geopolitical risks continue to support XAU/USD ahead of the US data, as tensions in the Middle East escalate. The US Dollar’s recovery from multi-week lows is seen as a key factor undermining demand for gold, while ongoing geopolitical risks temper the downside. Iran’s launch of ballistic missiles at Israel and subsequent air strikes in Lebanon raise the risk of a full-blown war in the region, impacting investor appetite for riskier assets.
Stronger US labor market reports and Federal Reserve Chair Jerome Powell’s hawkish remarks on Monday have assisted the US Dollar in its recovery. Positive data such as the US JOLTS Job Openings survey and the ADP private-sector jobs report suggest a resilient US labor market, forcing investors to reconsider the likelihood of a 50-basis points interest rate cut by the US central bank in November. Additionally, hopes for China’s stimulus measures to boost its economy act as a headwind for the safe-haven Gold price. Geopolitical tensions also play a role, as an Israeli strike on Beirut and Iran’s ballistic missile attack on Israel increase the risk of war in the Middle East.
From a technical perspective, Gold price’s range-bound action is viewed as a bullish consolidation phase following a recent rally to record highs. Oscillators on the daily chart remain in positive territory, favoring bullish traders. Immediate resistance levels are seen at $2,672-$2,673 and $2,685-$2,686, with $2,700 marking a potential trigger for further upside. On the downside, support at $2,625-$2,624 may hold, but a break below could lead to a decline towards $2,560 and $2,535-$2,530. The $2,500 psychological level is a major support zone.
In the context of risk sentiment, “risk-on” and “risk-off” markets determine investor behavior based on their appetite for risk. During “risk-on” periods, stock markets, commodities (excluding gold), and certain currencies tend to rise due to optimism about the future. Conversely, during “risk-off” periods, investors opt for safer assets like bonds, Gold, and safe-haven currencies like the USD, JPY, and CHF. Major currencies such as AUD, CAD, and NZD rise in “risk-on” markets due to their reliance on commodity exports for growth, while safe-haven currencies benefit during “risk-off” scenarios.
In conclusion, the Gold price faces a mix of influences including a stronger USD, geopolitical tensions in the Middle East, and varied risk sentiment in the market. With the USD gaining strength and geopolitical risks providing support to the safe-haven yellow metal, traders are advised to exercise caution before placing aggressive directional bets. The upcoming US economic data releases and speeches by influential FOMC members may provide short-term opportunities for trading XAU/USD. Technical indicators suggest a bullish bias for Gold price, but key support and resistance levels need to be closely monitored to gauge potential price movements in the near future.
