The gold price (XAU/USD) continues to experience pressure, marking a second consecutive day of declines on Thursday. This dip comes as investors react to the positive US labor market report from Wednesday. The upbeat figures dampened hopes for a substantial Federal Reserve rate cut in November, leading to a rise in the US Dollar (USD), which reached a three-week high. This stronger USD strength impacts gold prices, as the precious metal tends to weaken when the dollar strengthens.
However, the ongoing tensions in the Middle East are playing a balancing act. These geopolitical risks, notably the missile attacks between Iran and Israel, keep the gold price supported as investors seek safe-haven assets. This cautious atmosphere leaves the downside of gold prices somewhat limited.
Gold Market Movers: USD Strength and Geopolitical Uncertainty
The key driver behind gold’s recent decline is the US labor market’s resilience. On Wednesday, the Automatic Data Processing (ADP) report revealed an increase of 143K private-sector jobs in September, exceeding expectations. This, coupled with a positive US JOLTS Job Openings report earlier in the week, further solidified the labor market’s stability. As a result, investors scaled back their expectations for a significant rate cut by the Federal Reserve.
At the same time, Federal Reserve Chair Jerome Powell’s hawkish stance this week added fuel to the USD’s rise. These factors are contributing to gold’s current subdued performance.
On the other hand, geopolitical instability, particularly in the Middle East, continues to lend support to gold. Iran launched over 200 missiles at Israel, while Israel responded with airstrikes on Beirut, Lebanon. This escalation fuels concerns about a larger conflict, leading investors to seek safer investments like gold, tempering the metal’s losses.
Short-Term Outlook: Geopolitical Risks vs. Economic Strength
The ongoing tension in the Middle East provides a foundation for gold price stability. Risk-averse investors are hesitant to fully abandon gold in light of a potential full-scale conflict. This uncertainty around geopolitical developments in the region makes it difficult to place strong bearish bets on gold’s immediate future.
The US labor data expected in the coming days, especially the closely watched Nonfarm Payrolls report, will likely influence further moves in the market. Until then, Thursday’s Initial Jobless Claims and ISM Services PMI data, along with comments from Federal Open Market Committee (FOMC) members, could provide short-term trading opportunities for investors.
Technical Analysis: Crucial Levels to Monitor for Gold Price Movement
From a technical analysis standpoint, gold’s price action this week appears range-bound, following a sharp rally to near-record highs. The recent consolidation suggests the gold market may still be in a bullish phase, especially with daily chart oscillators showing strength.
Key support remains at the $2,625-$2,624 level, which aligns with a previous ascending channel resistance. A significant break below this level could lead to a drop below $2,600, pushing the gold price towards the next support zone of $2,560. On the upside, immediate resistance is seen near the $2,672-$2,673 area, followed by $2,685-$2,686, and the crucial $2,700 mark. If gold prices break above this, it could pave the way for an extended uptrend.
To stay updated with daily gold market insights, be sure to visit Daily Gold Signal. For more in-depth analyses on gold price fluctuations, check out our Daily Gold Update for the latest trends and insights.
