GOLD Price Analysis – Oct 02, 2024
Daily Price Outlook
During the early European trading session, Gold (XAU/USD) faced challenges in sustaining its overnight upward momentum, turning bearish around the 2,655 level and hitting an intra-day low of 2,644.
However, the precious metal had rebounded over 1% on Tuesday amid escalating tensions in the Middle East, prompted by Israel's attack on Hezbollah and Iran's subsequent response, which included nearly 200 missile launches. However, this bullish trend proved short-lived as the US dollar gained strength and contributing to gold's current decline.
Escalating Middle East Tensions Drive Gold Demand Amid Conflict and Economic Uncertainty
Tensions in the Middle East have reached new heights following Iran’s recent missile strikes against Israel. This military action is seen as a response to Israel's aggressive operations against Hezbollah in Lebanon, a group that receives substantial backing from Iran.
In light of these developments, Israeli Prime Minister Benjamin Netanyahu warned of significant consequences for Iran, while Iranian authorities cautioned that further attacks would lead to catastrophic retaliation. Such escalation raises concerns about a wider conflict in the region and has fueled demand for gold, which is often viewed as a safe-haven asset during turbulent times.
Therefore, the escalating tensions in the Middle East, driven by Iran's missile strikes against Israel and potential retaliation, have heightened demand for gold as a safe-haven asset, leading to increased buying interest amid fears of a broader regional conflict.
Strengthening US Dollar Caps Gold Gains Amid Labor Market Resilience and Rate Cut Speculation
On the US front, the broad-based US dollar is gaining strength, supported by a resilient labor market. The Job Openings and Labor Turnover Survey (JOLTS) indicated an unexpected increase in job openings, reaching 8.04 million in August. Meanwhile, the Institute for Supply Management (ISM) reported that the Manufacturing PMI remained steady at 47.2 in September, signaling a continued contraction in business activity for the sixth consecutive month.
Investors are now closely monitoring the likelihood of additional interest rate cuts by the Federal Reserve. Although Fed Chair Jerome Powell recently indicated the potential for two more rate cuts of 25 basis points each this year, there is still speculation about a more significant 50 basis point cut in November.
However, the CME Group's FedWatch Tool currently assigns a 35% probability to this larger cut. Furthermore, Atlanta Fed President Raphael Bostic has noted that larger reductions might be warranted if the labor market shows signs of weakness.
Market participants are closely watching the upcoming US ADP private-sector employment report, expected to reveal an addition of 120,000 jobs in September, alongside the Nonfarm Payrolls report, both of which could significantly impact market trends.
Consequently, the stronger US dollar, supported by a robust labor market, has constrained gold's recent upward momentum. Moreover, ongoing speculation about potential rate cuts adds uncertainty to the market, typically reducing gold's attractiveness. Rising interest rates and a stronger dollar tend to suppress demand for this non-yielding asset.
GOLD (XAU/USD) - Technical Analysis
Gold (XAU/USD) is currently trading at $2,654.30, down 0.35% for the day, as the metal faces renewed selling pressure. Despite a modest recovery attempt, gold failed to breach the immediate resistance level at $2,669.37, which aligns with its descending trendline and the 50-day Exponential Moving Average (EMA) at $2,656.41. This has reinforced bearish sentiment among traders.
The Relative Strength Index (RSI) is holding at 50, indicating a lack of strong momentum in either direction. If gold prices break below the immediate support at $2,648.16, it could trigger a deeper correction toward the next support levels at $2,639.79 and $2,631.27. Conversely, if gold manages to clear the $2,669.37 resistance, it could set the stage for a move higher to $2,677.74 and potentially $2,685.39.
Short-term technical indicators suggest a cautious outlook, with gold needing to maintain support above $2,648.16 to avoid further declines. Traders should watch for a clear break above $2,669.37 to confirm any renewed bullish momentum.
Gold remains under bearish pressure. An entry position could be considered below $2,660, targeting support at $2,648. For upside potential, a break above $2,669 is required to open further gains.
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