Gold price (XAU/USD) encountered rejection near $2,600 during the early European session on Monday. Despite minor intraday gains, bulls struggled to capitalize on a softer US Dollar (USD). Geopolitical uncertainties provided some support, but expectations of a less dovish Federal Reserve (Fed) capped potential gains for the yellow metal. Traders remain cautious, awaiting strong momentum for recovery after recent lows.
Gold Price Analysis: Dynamics Amid a Shifting Economic Landscape
The gold market remains influenced by evolving economic factors. Last week, XAU/USD saw its largest decline since September 2023, primarily due to a USD rally. The Federal Reserve’s stance, supported by resilient US economic data, has made traders hesitant to place bullish bets on gold.
Geopolitical Tensions and Their Impact on Gold Price Analysis
Global uncertainties, particularly geopolitical tensions, have created a safety net for gold price. Over the weekend:
- Ukraine-Russia Conflict: Ukraine utilized long-range missiles from the US to strike deeper inside Russian territories. Russia responded with drone and missile attacks, targeting energy infrastructure and resulting in significant civilian casualties.
- Middle East Crisis: Israeli forces intensified military actions in Gaza and Lebanon, leading to substantial losses.
These developments have bolstered gold price as a haven asset, albeit temporarily.
Federal Reserve’s Impact on Gold Price Analysis and Market Gains
The Federal Reserve’s policy outlook continues to weigh on gold price. Comments from prominent officials reflect the Fed’s cautious approach:
- Fed Chair Jerome Powell emphasized that inflation remains above the 2% target, suggesting no immediate need for rate cuts.
- Boston Fed President Susan Collins hinted at the possibility of another rate cut in December but stressed it’s not guaranteed.
- Chicago Fed President Austan Goolsbee stated that progress toward the 2% inflation goal could lead to lower rates eventually.
The benchmark 10-year US Treasury yield has remained strong, further favoring the USD and suppressing gold price appeal.
Technical Analysis: Key Levels to Watch
Gold’s recent pullback has highlighted critical technical zones:
Support Levels
- The $2,536-$2,535 region aligns with the 100-day Simple Moving Average and the 50% Fibonacci retracement.
- A break below $2,535 could drive prices toward the psychological $2,500 mark and the 61.8% Fibonacci retracement near $2,480.
Resistance Levels
- The $2,600 level remains a strong barrier, with further resistance at $2,620-$2,622.
- A sustained move beyond $2,622 could initiate a rally toward $2,655-$2,657, potentially reclaiming the $2,700 level.
Outlook: Patience Remains Key for Bulls
Gold bulls need clear buying signals to reclaim dominance. Factors like Fed policies and geopolitical tensions will play crucial roles in shaping the market’s trajectory. Traders are advised to monitor technical levels closely for potential entry points.
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