Gold price slumped on Wednesday amidst heightened tensions between Israel and Iran, causing a 0.50% daily drop. Traders are closely monitoring Israel’s response to Iran’s attack on Tuesday, with geopolitics remaining a key driver for Gold prices. The XAU/USD pair trades at $2,648 after hitting a high of $2,663 following back-to-back bearish sessions since last Friday. The market mood remains downbeat, with US equities trading in the red and developments in the Middle East suggesting a likely escalation, potentially extending Bullion prices gains in the short term.
According to reports, Israel’s envoy to the United Nations stated that Iran will face consequences for its missile attack, with the US also considering response options. Private hiring in the US exceeded estimates in September, as per ADP National Employment Change data. Meanwhile, Richmond Fed President Thomas Barkin noted that the rate cut in September acknowledged rates were ‘out of sync’. The non-yielding metal added to gains following the Fed’s decision to lower the fed funds rate at the September meeting, despite facing headwinds from higher US Treasury yields and a stronger US Dollar.
The US Dollar Index gained 0.39%, standing at 101.60, with US 10-year Treasury note yields at 3.783%, up five basis points. Investors are focusing on further US jobs data, with Nonfarm Payrolls figures expected to show a 140K increase in September, slightly lower than August. The ADP National Employment Change for September surpassed forecasts at 143K, with August Job Openings & Labor Turnover Survey also showing improvement. However, the ISM Manufacturing PMI for September remained unchanged, falling short of estimates. Market participants place the odds of a 25 bps Fed rate cut at 63.8%.
Gold price remains upwardly biased despite losing some steam as traders book profits, with technical analysis showing a potential drop below $2,650 opening the door to testing lower levels. When Gold is in the limelight due to its safe-haven status, it tends to rise during turbulent times. Central banks are major Gold holders, utilizing Gold to support their currencies during market uncertainties. With an inverse correlation to the US Dollar and US Treasuries, Gold tends to rise when these assets depreciate, making it a popular choice for diversifying assets in times of market volatility. Various factors, including geopolitical instability, fears of recession, and interest rate movements, can affect Gold prices, heavily influenced by the performance of the US Dollar.
