Gold price attracted some dip-buyers and stalled its decline from over a one-week top set on Monday. Geopolitical risks were driving some haven flows, although a bullish USD might have capped gains for the commodity. Signs of a slowdown in China, the biggest bullion consumer, could further weigh on the XAU/USD. The US Dollar surged to its highest level since August 8 amid growing acceptance of a less aggressive policy easing by the Federal Reserve and bets for a regular 25 basis points interest rate cut in November. Minneapolis Fed President Neel Kashkari suggested that further modest interest rate cuts could be appropriate, and Fed Governor Christopher Waller noted that the central bank should proceed with more caution on rate cuts. Israeli vows of forceful responses to conflicts in the Middle East raised the risk of geopolitical tensions, offering support to the safe-haven precious metal.
Investors have priced out the possibility of another oversized interest rate cut by the Federal Reserve (Fed) in November, which has kept the US Treasury bond yields elevated and pushed the buck to over a two-month top. This flow of money away from the non-yielding yellow metal contributed to the decline in the Gold price. In addition, disappointment over China’s fiscal stimulus and weak inflation figures released over the weekend undermined the Gold price further. However, geopolitical risks stemming from conflicts in the Middle East helped to stall the intraday slide and keep the Gold price holding steady above the $2,640 level during the Asian session on Tuesday.
Technical analysis suggests that the Gold price could aim to surpass the all-time peak touched in September and conquer the $2,700 mark. The overnight swing high around the $2,666-2,667 region is acting as an immediate hurdle, with potential to lift the Gold price back towards the all-time peak touched in September. Failure to defend support near the $2,600 round-figure mark could trigger a further fall towards the $2,560 zone, with a corrective slide extending towards the $2,500 psychological mark. The corrective slide could extend further towards the $2,535-2,530 region en route to the $2,500 psychological mark.
Gold has played a significant role in human history as a store of value and medium of exchange. It is widely seen as a safe-haven asset and a hedge against inflation and depreciating currencies. Central banks are the biggest holders of Gold, using it to diversify reserves and improve perceived economic strength. In 2022, central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves, the highest yearly purchase on record. Gold has an inverse correlation with the US Dollar and US Treasuries, rising when the Dollar depreciates and weakening with risk assets.
The price of Gold can be influenced by various factors, including geopolitical instability, fears of recession, interest rates, and the behavior of the US Dollar. As a yield-less asset, Gold tends to rise with lower interest rates and fall with a strong Dollar. Geopolitical tensions and conflicts can quickly escalate Gold prices due to its safe-haven status. The release of economic data and Fedspeak may provide trading opportunities around the XAU/USD pair later during the North American session. Traders are keeping a close eye on geopolitical developments and economic indicators to assess the future direction of the Gold price.
