Gold price has been on the rise amid increasing tensions in the Middle East and uncertainty surrounding the upcoming US elections. With the US political landscape in flux and geopolitical risks at play, investors are turning to safe-haven assets like gold for protection. Additionally, a softer tone in US Treasury bond yields and a cautious market mood are providing further support to the precious metal.
Bets for smaller rate cuts by the Federal Reserve are also contributing to the elevated US bond yields and supporting the US Dollar, which in turn is keeping traders cautious about placing new bullish bets on gold. Investors are also waiting on the sidelines ahead of key US macro releases this week, which will provide more clarity on the Fed’s rate outlook and offer a fresh direction for the gold price.
Recent US macro data has dampened hopes for a significant rate cut by the Fed after the US election, further reinforcing the support for US bond yields. With the presidential election nearing, the US political landscape is uncertain, with Vice President Kamala Harris and Republican nominee Donald Trump in a tight race for the White House. In addition, the US has warned Iran of severe consequences following aggressive acts against Israel.
China’s gold consumption has seen a decline in the first three quarters of 2024, attributed to high prices affecting buying interest for jewelry products. Looking ahead, investors are focusing on US economic data releases, such as the Consumer Confidence Index and Job Openings and Labor Turnover Survey (JOLTS), for short-term trading opportunities. This week’s economic data will offer insights into the Fed’s interest rate outlook and influence the USD price dynamics.
From a technical standpoint, gold price needs to break through the $2,750 supply zone to signal a bullish momentum. Further upward movement could lead to retesting the all-time peak around $2,759 and possibly reaching the $2,800 mark. However, the Relative Strength Index (RSI) on the daily chart suggests caution for bulls as it approaches the overbought territory. Any corrective pullback might find support near the $2,725 region, with a break below $2,715 opening up further downside potential.
In terms of risk sentiment, the terms “risk-on” and “risk-off” refer to the level of risk investors are willing to take during a particular period. During “risk-on” markets, investors are optimistic and tend to buy risky assets, while in “risk-off” markets, investors play it safe and opt for less risky assets. Different asset classes react differently during these periods, with stock markets and commodities rising during “risk-on,” and bonds and safe-haven currencies seeing gains during “risk-off.”
Overall, the gold price is currently supported by a combination of geopolitical tensions, US election uncertainty, and market caution. With key US economic data releases on the horizon, investors are closely watching for cues on the Fed’s rate outlook and the direction of the USD, which will likely impact the gold price in the near term.
