GOLD Price Analysis – Oct 03, 2024
Daily Price Outlook
Gold (XAU/USD) continued its downward trend on Thursday, trading around $2,640 as expectations for aggressive Federal Reserve rate cuts diminished.
The resilient US labor market bolstered the US Dollar (USD), which reached a multi-week high, diminishing the appeal of non-yielding assets like gold.
Despite this, concerns over escalating conflicts in the Middle East and a general decline in global interest rates are providing some support, limiting further downside for gold prices.
Strengthening US Dollar and Shifting Labor Market Expectations Weigh on Gold Prices
On the US front, the broad-based US dollar is gaining strength as recent economic data highlights a resilient labor market. This has tempered expectations for aggressive interest rate cuts by the Federal Reserve (Fed).
Following stronger labor market reports and hawkish comments from Fed Chair Jerome Powell, the dollar has recovered from its lowest levels since July 2023, rising to a three-week high.
This increase has negatively impacted demand for gold, which is a non-yielding asset typically priced in USD.
Gold’s price upside is also limited by fluctuating expectations about future US interest rates. Last week, the chances of the Fed cutting rates by 50 basis points in November were above 60%, but those odds have since dropped to around 30%.
This shift follows the release of stronger-than-expected US jobs data, suggesting the economy is stable.
For instance, the JOLTS Job Openings survey showed a surprising increase in available jobs, rising from 7.711 million to 8.040 million in August.
Additionally, the ADP report revealed that private-sector employers added 143,000 jobs in September, exceeding expectations. These developments are influencing gold's demand as market sentiment shifts.
Escalating Tensions in the Middle East and Its Impact on Gold Prices
On the geopolitical front, tensions in the Middle East have risen sharply as Iran launched over 200 ballistic missiles at Israel on Tuesday.
Iran claims these missiles targeted key military and security sites in Israel in retaliation for deadly attacks on Gaza and Lebanon and the killings of senior leaders from Hamas, Hezbollah, and the IRGC.
Israel reported that many of the missiles were intercepted and has vowed to respond, but Iran has warned of “crushing” attacks if Israel takes action.
Meanwhile, Israeli forces have conducted ongoing attacks across the Gaza Strip, resulting in the deaths of at least 29 Palestinians. Since October, the situation has worsened, with reports indicating that over 41,638 people have been killed and around 96,460 injured in Gaza due to Israeli strikes.
Therefore, the escalating conflict and instability in the region could increase demand for gold as a safe-haven asset amidst rising uncertainties.
GOLD (XAU/USD) - Technical Analysis
Gold prices are currently trading at $2,656.04, marking a slight decline of 0.11% as investors await key U.S. economic data later in the week.
The precious metal has entered a consolidation phase, oscillating within a narrow range as market participants assess the impact of the upcoming Non-Farm Employment report and Average Hourly Earnings data.
The 4-hour chart indicates a symmetrical triangle formation, with immediate resistance seen at $2,663.03 and support levels around $2,644.53.
This pattern typically suggests that a significant price breakout is on the horizon, though the direction remains contingent on the forthcoming economic indicators.
The 50-day Exponential Moving Average (EMA) is positioned at $2,652.76, acting as a short-term pivot point for price movements. If the metal stays above this level, it could pave the way for a bullish run, targeting $2,671.80 and $2,685.66 in the coming sessions.
On the downside, if prices dip below $2,644.53, gold may see further declines towards the next support at $2,636.09 and potentially $2,627.49.
The Relative Strength Index (RSI) sits at 53, reflecting a neutral stance with no clear overbought or oversold signals, suggesting that traders should remain cautious as volatility could surge.
Market participants should look for a break above the $2,663.03 resistance to signal a bullish continuation, while a fall below $2,644.53 may reignite bearish sentiment.
Conclusion: Traders looking to enter positions could consider buying above $2,653, targeting $2,670 with a stop-loss set at $2,645, given the current technical setup and near-term economic calendar.
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