The gold price (XAU/USD) has recently pullback after reaching an all-time high of $2,640. As trading shifted towards the European session, gold slipped to a lower range. This pullback was primarily driven by the renewed demand for the US Dollar (USD), bolstered by an uptick in US Treasury bond yields. With gold slightly overbought on the daily chart, traders saw an opportunity for profit-taking.
Despite this correction, the downside risk for gold prices appears to be limited. Growing expectations of aggressive policy easing by the US Federal Reserve (Fed), combined with ongoing global geopolitical risks and a bleak economic outlook, are likely to support gold in the near future.
Key Market Movers: Impact of USD Demand on Gold
Fed Easing Expectations
Bets on a 125 basis-point rate cut by the Federal Reserve for 2024 have provided solid upward momentum to gold prices. Last week’s significant 50-basis-point rate cut only increased the likelihood of further easing, pushing gold to new highs. According to the CME FedWatch Tool, traders are anticipating another major rate cut during the November meeting, which has somewhat restricted the recent USD recovery from its year-to-date low.
US Treasury Yields and Inflation Outlook
Recent statements from Fed officials like Neel Kashkari and Raphael Bostic have also influenced market sentiment. They suggested that the balance of risks had shifted, emphasizing weaker labor market conditions over inflation. Atlanta Fed’s President Bostic noted the labor market’s increased risks, while Chicago Fed’s President Austan Goolsbee indicated that higher interest rates might no longer be necessary, given labor market concerns.
A recent US survey showed steady business activity, with inflationary pressures increasing as service prices rose. The data suggest that inflation could accelerate, which may benefit gold as an inflation hedge.
Global Geopolitical Risks Supporting Gold
Geopolitical instability continues to underpin gold’s safe-haven appeal. Israeli airstrikes in Lebanon and escalating tensions in the Middle East add to market concerns. Additionally, US political uncertainty and a fragile global economy are factors that will likely support the price of gold moving forward.
Although China’s surprise rate cut and a US government spending bill have capped recent gold gains, the overall geopolitical environment remains favorable for the precious metal. Many traders are waiting for the US Personal Consumption Expenditures (PCE) Price Index report on Friday before making further moves, especially given gold’s overbought status on the daily chart.
Technical Outlook: Buying Opportunity for Gold?
Gold Holding Above $2,600
From a technical standpoint, gold’s break above the $2,600 mark is significant for bullish traders. The Relative Strength Index (RSI) remains above 70, signaling caution due to overbought conditions. A short-term consolidation or pullback may offer a better buying opportunity for traders.
Support Levels to Watch
If the price dips below $2,600, fresh buyers are expected to enter the market. The next level of support is around $2,560, with stronger support at $2,530-$2,535. If the price falls below $2,500, it could lead to a more substantial decline, shifting the market’s bias toward bearish positions.
Conclusion
While gold price pullback have retreated from their all-time high, the downside appears limited. Expectations of aggressive Federal Reserve easing, coupled with geopolitical risks and economic concerns, should continue to support gold as a safe-haven asset. Traders are likely to monitor upcoming US data, such as the PCE Price Index, for further insight into inflation and interest rate trends.
For further insights into daily gold trends and updates, visit Daily Gold Signal and stay updated on the latest market movements through their Daily Gold Update section.
