The price of gold (XAU/USD) has maintained a positive trend for the second consecutive day, holding onto gains near the $2,675 level, marking a three-week high. As of Wednesday’s European session, geopolitical risks and uncertainty over China’s fiscal policies are limiting the appetite for riskier investments. This leads to weaker performance in the equity markets and boosts demand for the safe-haven asset, gold.
In addition, falling US Treasury bond yields are providing extra support to the non-yielding gold price. Although traders expect a regular 25 basis point rate cut by the Federal Reserve in November, the rising US Dollar (USD) — which has hit a two-month high — might limit further gains in gold.
HMarket Overview: Factors Driving Gold Price Gains
Declining Bond Yields and Weaker Manufacturing Data
US Treasury bond yields have fallen for two consecutive days. This decline followed disappointing US manufacturing data and reduced inflation risks, primarily driven by a drop in oil prices. The New York Federal Reserve’s Empire State Manufacturing Index fell sharply, signaling weaker economic conditions.
Lower Crude Oil Prices and Reduced Inflationary Concerns
Crude oil prices have reached a two-week low due to easing fears of supply disruptions. The weaker demand outlook has reduced inflationary concerns, which may prompt the Federal Reserve to continue cutting interest rates. However, the expected smaller rate cut in November will likely support the USD, capping further gains for gold.
Geopolitical Risks Supporting Gold Prices
Geopolitical tensions, particularly in the Middle East, are keeping gold in demand as a safe-haven asset. Israeli Prime Minister Benjamin Netanyahu has rejected calls for a ceasefire, while the militant group Hezbollah has threatened to escalate its attacks. These developments raise concerns about further conflict, which has boosted demand for gold.
The Biden administration has also warned Israel about the potential consequences if it does not allow more humanitarian aid into Gaza. These factors contribute to the uncertainty, which continues to support gold prices.
Technical Outlook for Gold Prices
From a technical standpoint, gold bulls seem determined to push the price toward the $2,700 mark. However, they may face resistance around the $2,685-$2,686 region, which is near the all-time high touched in September. If this level is breached, it could signal an extension of the current uptrend. On the downside, immediate support is found around the $2,650 level. A break below this point might lead to further declines, potentially targeting the $2,630 region, though buying interest around $2,600 is expected to limit losses.
Conclusion
The gold market remains influenced by various factors, including US bond yields, inflation data, and geopolitical tensions. With the potential for smaller rate cuts by the Federal Reserve and escalating risks in the Middle East, gold is likely to maintain its position as a preferred safe-haven asset.
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