Gold prices have remained steady above $2,650 for the second straight session as traders increase the odds for another interest rate cut by the Federal Reserve in November. The XAU/USD mostly traded near $2,660, up 0.14%, with the market sentiment shifting slightly negative during the US session as Wall Street traded in the red. The high US Treasury yields have kept the gold price from rising further, hitting a record high of $2,670 and then retreating as yields rose to 3.775%.
The US Dollar Index (DXY) bounced off a 14-month low and increased by 0.54% to 100.88. US economic data showed a slight cooling in manufacturing sector activity while services remained resilient. However, Consumer Confidence via the Conference Board (CB) suggests that conditions in the labor market may be worse than projected. Traders are confident about another 50 bps Fed rate cut in November, with the odds standing at 60%, while a 25 bps cut stands at 40%.
Gold prices have risen by 29% in 2024, driven by physical demand for Gold and major central banks beginning their easing cycles. Geopolitical tensions may also contribute to traders keeping their sights on the $2,700 mark. The XAU/USD technical outlook shows a consolidation around $2,650-$2,660 with potential for further gains. However, the Relative Strength Index (RSI) signals that Gold is overbought, which could lead to a temporary pullback before the rally resumes. If Gold extends its rally past the current YTD peak of $2,670, further challenges at $2,675, $2,700, $2,750, and $2,800 could be expected.
On the contrary, if Gold drops below $2,650, a test of the September 18 daily high at $2,600 may occur, followed by support levels at $2,546 and the 50-day Simple Moving Average (SMA) at $2,488. Gold prices are being capped by US Treasury bond yields, with tensions in the Middle East between Israel and Hezbollah supporting prices. Investors are awaiting Fed Chair Jerome Powell’s speech on Thursday as well as monitoring ETF flows, geopolitical tensions, and China’s stimulus measures, all of which could potentially drive Gold prices higher. According to the World Gold Council, global physically-backed Gold ETFs saw modest net inflows of 3 metric tons last week.
