- Gold price continues scaling new all-time peaks amid US election jitters, Middle East woes.
- The momentum seems unaffected by elevated US Treasury bond yields and a bullish USD.
- Traders now look forward to important US macro data before positioning for further gains.
Gold prices (XAU/USD) climbs to a fresh record high during the Asian session on Wednesday as uncertainties surrounding the US presidential election, and the Middle East conflict continue to boost demand for traditional safe-haven assets. Apart from this, a modest pullback in the US Treasury bond yields and subdued US Dollar (USD) price action benefit the precious metal. The supporting factors, to a larger extent, overshadow the upbeat market mood, which tends to undermine the commodity.
Even expectations for smaller interest rate cuts by the Federal Reserve (Fed) and elevated US Treasury bond yields do little to hider the underlying bullish sentiment surrounding the non-yielding Gold price. It, however, remains to be seen if bulls can build on the momentum amid slightly overbought conditions on the daily chart and ahead of key US macro releases. The data might provide cues about the Fed’s rate outlook and determine the next leg of a directional move for the XAU/USD.
Daily Digest Market Movers: Gold price benefits from US political uncertainty and Middle East tensions
- Republican former US President Donald Trump and Democratic Vice President Kamala Harris are caught in a tight race for the White House, fueling political uncertainty and pushing the Gold price to a fresh record high on Wednesday.
- An Israeli strike on a residential building in northern Gaza killed nearly 100 people on Tuesday. This comes days after the Israeli military confirmed on Sunday that the air force had conducted a precise strike targeting Hamas fighters.
- The development raises the risk of a further escalation of tensions in the Middle East and contributes to the bid tone surrounding the safe-haven XAU/USD, offsetting the recent surge in the US Treasury bond yields and the US Dollar.
- The incoming US macro data suggested that the US economy remains on a strong footing, reaffirming market expectations for a less aggressive policy easing by the Federal Reserve and the prospects for smaller interest rate cuts.
- The Conference Board reported on Tuesday the US Consumer Confidence Index registered its largest single-month gain since March 2021 and rose to a nine-month high of 108.7 in October, from September’s upwardly revised 99.2.
- This reflected optimism in business conditions and the job market, overshadowing the disappointing Job Openings and Labor Turnover Survey, or JOLTS report, which showed that vacancies fell to more than a 3-1/2-year low in September.
- Apart from this, deficit-spending concerns after the November 5 US presidential election keep the US bond yields elevated near a multi-month top, which, however, do little to hinder the precious metal’s follow-through positive move.
- Traders now look to Wednesday’s US economic docket, featuring the release of the ADP report on private-sector employment and the Advance GDP print, which is expected to show that the economy grew by a 3% annualized pace in Q3.
- The market attention will then shift to the US Personal Consumption Expenditure (PCE) Price Index – the Fed’s preferred inflation gauge – on Thursday and the closely-watched US Nonfarm Payrolls (NFP) report on Friday.
Technical Outlook: Gold price flirts with multi-month ascending trend-line hurdle amid overbought RSI
From a technical perspective, the overnight breakout above a one-week-old trading range was seen as a fresh trigger for bulls. The subsequent move up lifts the Gold price to an ascending trend-line resistance extending from early July, currently pegged near the $2,780-2,785 region, which could now act as a strong barrier amid a slightly overbought Relative Strength Index (RSI) on the daily chart. A sustained strength beyond the said barrier, however, could lift the XAU/USD further towards the $2,800 mark.
On the flip side, any meaningful corrective slide now seems to find decent support near the trading range hurdle breakpoint, around the $2,750 region. Some follow-through selling could make the Gold price vulnerable to extend the fall further towards the $2,732-2,730 intermediate support en route to the $2,715 area. This is followed by the $2,700 mark, which if broken should pave the way for a decline towards the next relevant support near the $2,675 zone en route to the $2,657-2,655 region.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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