GOLD Price Analysis – Nov 05, 2024

Daily Price Outlook

Gold prices (XAU/USD) have managed to recover some of their early losses but are still trading sluggishly around the 2,736 level. However, the safe-haven demand for gold is likely to rise amid the uncertainty surrounding the election and the potential for escalating geopolitical tensions in the Middle East. This risk-off environment provides some support for the precious metal.

Meanwhile, the ongoing expectations that the Federal Reserve may cut interest rates due to a slowing labor market are leading to a drop in US Treasury bond yields. This, in turn, weakens the US Dollar, benefiting gold prices.

Rising Safe-Haven Demand Drives Gold Prices Amid US Election and Geopolitical Uncertainty

Despite some early losses, gold demand remains supported by the uncertainty surrounding the closely contested US presidential election and escalating geopolitical tensions in the Middle East. The political situation is creating a caution among investors, leading them to seek safety in gold. It is worth noting that the recent opinion polls show Democratic candidate Kamala Harris and Republican Donald Trump are in a tight race, which adds to the political uncertainty.

At the same time, the market is seeing a shift away from the “Trump trade,” as Donald Trump’s chances of winning have decreased. This has contributed to lower US Treasury bond yields. The yield on the benchmark 10-year US government bond experienced its biggest drop in two months, while the two-year Treasury note also saw a significant decline.

Investors are anticipating that the Federal Reserve will cut interest rates further, especially as signs indicate a slowing US labor market. These lower yields are not helping the US Dollar strengthen and are instead providing support for gold prices, which do not earn interest.

Moreover, geopolitical tensions are escalating, particularly with Iran warning of a harsh response to recent Israeli strikes, while the US has cautioned Iran against attacking Israel. This situation adds to market uncertainty. Later today, the US will release the ISM Services PMI report, but it is unlikely to impact the market much as everyone awaits the outcome of the presidential election.

Therefore, the uncertainty from the US presidential election and rising geopolitical tensions, combined with lower US Treasury yields and interest rate cut expectations, are boosting safe-haven demand for gold, helping to support its prices in a cautious market environment.

GOLD (XAU/USD) – Technical Analysis

Gold (XAU/USD) is currently trading at $2,735.45, showing a modest decline of 0.04% on the day. The metal remains under pressure as it navigates around a crucial pivot point at $2,741.63, and technical indicators are signaling further downside potential if prices break below this level. The Relative Strength Index (RSI) stands at 44, indicating a bearish sentiment without reaching oversold territory.

Immediate resistance is situated at $2,748.35, with further upside targets at $2,753.68 and $2,762.36. For bullish momentum to gain traction, gold would need to surpass these levels convincingly. However, a looming resistance at the 50-day EMA, currently at $2,741.23, could cap gains in the short term.

On the downside, immediate support is found at $2,731.72, followed by stronger floors at $2,725.00 and $2,717.20. A break below the $2,731.72 support may prompt increased selling pressure, potentially driving gold toward the $2,725 target.

Given the downward trend and the pressure from key resistance points, a prudent strategy may involve selling below $2,740 with a take-profit target set at $2,725, while setting a stop loss near $2,750 to manage risk.