The gold price trends (XAU/USD) has been drifting lower for six consecutive days, with the current value hovering just above a three-week low. Despite staying above the $2,600 threshold, the metal’s price has been undermined by a stronger US Dollar (USD) and fading expectations of aggressive Federal Reserve (Fed) rate cuts. Additionally, geopolitical developments, such as the potential ceasefire between Hezbollah and Israel, have further reduced demand for gold as a safe-haven asset. This has led to technical selling after the price broke below the $2,630 support level.
Factors Driving the Decline in Gold Prices
The gold price continues to face downward pressure due to various key factors:
- USD Strength: The US Dollar has reached its highest level since mid-August. This surge is linked to diminished hopes of significant rate cuts by the Federal Reserve. The USD’s bullish momentum has weighed heavily on the demand for non-yielding assets like gold.
- FOMC Meeting Anticipation: Traders are cautious as they await the minutes from the September Federal Open Market Committee (FOMC) meeting. The focus is on future rate cuts, especially in light of recent comments by various Fed officials. Investors are adjusting their positions ahead of these important updates.
- Geopolitical Impact: A potential ceasefire between Hezbollah and Israel has decreased the appeal of gold as a safe-haven asset. The lack of ongoing geopolitical risks is another factor that has contributed to the recent slide in gold price trends.
Gold Price Hangs Near Multi-Week Low Amid Modest USD Strength
The US Federal Reserve’s decisions on interest rates continue to influence gold prices significantly. According to the CME Group’s FedWatch Tool, there’s now an 85% probability of a 25-basis-point rate cut in November. If this materializes, it could stabilize gold price trends. However, further cuts may depend on future inflation and economic data. Several key Fed officials have expressed that any future policy moves will remain data-dependent.
Technical Outlook for Gold Prices
From a technical analysis standpoint, the breakdown below the $2,630 support level is an indication that gold price trends could fall further. If the $2,600 mark is decisively breached, gold may extend its decline towards the $2,560 support zone, and potentially even test the $2,530-$2,500 levels.
On the other hand, if gold manages to rebound, the previous support near $2,630-$2,635 could act as resistance. A further rally might push prices towards the $2,670 zone, but significant upward movement would require breaking past the $2,700 psychological level.
Conclusion: What’s Next for Gold Prices?
As traders remain cautious ahead of the FOMC meeting impact on gold minutes and upcoming inflation data, the gold market may experience further volatility. While the USD strength impact on gold remains strong and geopolitical risks subside, gold prices are likely to continue facing pressure. The key focus for the market will be on how the Fed’s monetary policy unfolds in the coming months. For more regular updates on gold market trends, visit Daily Gold Signal and stay informed with the latest insights from the Daily Gold Update.
