Gold prices are seeing a partial recovery, with XAU/USD trading in the $2,740s as of Monday. This uptick follows a softening in the US Dollar (USD), which enhances gold’s value since it’s primarily traded in USD. Rising demand from geopolitical uncertainty and hedge fund positioning further bolster this modest rally, as gold remains in a price range between $2,709 and $2,759.
Gold Prices Rise as USD Declines
Gold’s value has increased alongside a dip in the USD, a shift driven by traders pulling back on their expectations that former President Donald Trump will secure a return to the White House. In October, the Greenback gained strength, with many anticipating Trump’s economic policies would maintain high interest rates, attracting foreign capital to the US. But as election forecasts shift, this “Trump trade” effect has faded, which has positively impacted gold prices.
Election Uncertainty and Fed Rate Speculation Fuel Gold’s Gains
Polling and election projections now suggest Trump’s odds have dropped, leaving election results in a “coin toss.” This unpredictability has encouraged investors to hedge with gold, pushing prices higher. Additionally, speculation grows that the Federal Reserve might reduce interest rates by 50 basis points to ease any market volatility that could arise post-election. Since lower interest rates tend to benefit non-yielding assets like gold, this is another factor supporting its current price stability.
Geopolitical Risks Increase Gold’s Appeal
The current geopolitical environment is further driving safe-haven demand for gold. Iran has indicated intentions to respond to recent bombings in Israel, heightening regional tensions. Ayatollah Ali Khamenei, Iran’s Supreme Leader, stated that both the US and Israel “will receive a crushing response,” raising risk concerns and bolstering gold’s appeal as a secure asset.
Hedge Funds and Long Positions Support Gold’s Strength
The latest Commitment of Traders (COT) report indicates that hedge funds are continuing to maintain significant long positions in gold, although some short positions are also emerging. Bart Melek, Head of Commodity Strategy at TD Securities, noted that the trend remains mostly upward as funds chase this rally. This trend-following behavior from hedge funds has contributed to gold’s resilient price action.
Technical Analysis: Gold Within Familiar Range, but Trend Remains Upward
On Monday, gold has maintained a price range between $2,709 and $2,759. Despite last week’s retreat, the broader trend remains bullish across short, medium, and long time frames, hinting at potential further gains. A push above the recent high of $2,790 could trigger a move toward the $2,800 level, with further resistance likely around $2,850. Conversely, a decline might find support near the $2,709 range floor, with the overarching trend expected to continue afterward.
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