Gold prices have seen an increase as falling US Treasury yields have boosted demand for non-yielding assets. Traders are anticipating rate cuts from major central banks due to cooling inflation, with the European Central Bank (ECB) expected to act on October 17. Geopolitical uncertainty and the upcoming US elections are also fueling demand for Gold as a safe-haven asset amidst fears of an economic slowdown.
During the mid-North American session on Wednesday, Gold prices rose as US Treasury yields dropped and the US Dollar strength was disregarded. Market sentiment has improved, with three out of four US equity indices trading in the green. This drop in bond yields has supported the price of gold, which currently trades at $2,674, up by 0.46%. Despite hitting a year-to-date high of $2,685, gold prices have not yet reached the $2,700 mark.
Inflation in the UK has fallen below the Bank of England’s 2% target, leading to expectations of further easing by central banks. The ECB is expected to lower rates on October 17 to address inflation concerns and potential economic recession in the eurozone. Uncertainty surrounding the global economy’s slowdown and the upcoming US elections have also contributed to the increased demand for gold as a safe-haven asset.
Gold prices are expected to remain supported by the fall of the US 10-year Treasury bond yield. However, the overall strength of the US Dollar has limited the rally of Gold towards $2,700. The US Dollar Index, which measures the dollar against a basket of six currencies, has gained 0.34% to 103.57. Market indicators suggest that investors are pricing in a 50-basis-point Fed rate cut in the last two months of 2024.
Technically, the uptrend of Gold remains intact, with buyers aiming for the YTD high of $2,685. If this level is breached, a move towards $2,700, $2,750, and $2,800 could be on the horizon. Conversely, a drop below the October 4 high at $2,670 could lead to a retracement towards $2,650, with further support at $2,600 and the 50-day Simple Moving Average (SMA) at $2,561.
Upcoming data releases this week, such as US Retail Sales, Industrial Production data, and Initial Jobless Claims, will be closely monitored by market participants. Gold prices are likely to continue being influenced by geopolitical developments, China’s stimulus program, and Middle East tensions. The uncertainty and volatility in the market are expected to persist until the next US administration is settled, making gold and oil effective portfolio hedges.
