Gold prices fell to $2,646 after September inflation data showed progress toward the Fed’s 2% target, causing the US 10-year Treasury yield to drop by five basis points and the US Dollar Index to dip by 0.16% to 100.41. However, despite rising geopolitical risks as Israel strikes Lebanon, Gold failed to gain momentum as traders cashed in profits.
The BEA revealed that September inflation continued to evolve toward the Federal Reserve’s goal, warranting further easing by the Fed. The XAU/USD trades at $2,657, down by almost 0.50%, with analysts speculating that traders were booking profits in response to the data. The US 10-year Treasury note yield fell five basis points to 3.749%, leading to a decrease in the Greenback as the US Dollar Index (DXY) slumped.
Following the data, the odds of 50 basis points of easing at the November meeting increased, according to the CME FedWatch Tool. Despite expectations for Gold prices to rise, the XAU/USD plummeted below the September 26 daily low of $2,654, indicating a potential deeper pullback. Additionally, the University of Michigan Consumer Sentiment for September improved in its final reading.
An escalation in the Middle East conflict between Israel and Hezbollah adds to the geopolitical risks. Israel struck Hezbollah’s main headquarters in southern Beirut, with the possibility of a ground invasion of Lebanon on the table. Gold ETFs saw modest net inflows last week but have yet to fully contribute to Gold’s rally, with expectations for increased activity in the coming months.
Gold prices hit an all-time high of $2,685 before falling to $2,650. Short-term momentum favors sellers as the Relative Strength Index (RSI) exits overbought territory. If XAU/USD drops below $2,650, the next support levels to test will be $2,600, $2,546, and the 50-day Simple Moving Average (SMA) at $2,488. However, if XAU/USD extends its rally past $2,685, the next resistance levels are $2,700, $2,750, and $2,800.
Gold has historically been used as a store of value and medium of exchange, serving as a safe-haven asset during turbulent times. Central banks, especially those in emerging economies, are increasing their Gold reserves to diversify and strengthen their economies. Gold has an inverse correlation with the US Dollar and US Treasuries, making it attractive during times of Dollar depreciation and risk aversion in the stock market. The price of Gold can be influenced by geopolitical instability, economic recessions, interest rates, and the behavior of the US Dollar.
