GOLD Price Analysis – Oct 09, 2024
Daily Price Outlook
Gold prices (XAU/USD) prolonged its six-day downward trend and remained well offered around $2,621 after hitting an intra-day low of $2,615. This downward trend is triggered by the bullish US dollar, which gained positive traction in the wake of decreasing expectations for a significant Fed rate cut in November. Traders seems cautious to place any strong position ahead of the upcoming FOMC meeting minutes and U.S. inflation data. Alongside these factors, reports of a potential ceasefire between Hezbollah and Israel are intensifying the downward pressure on gold prices.
Strong US Dollar and Mixed Fed Signals Weigh on Gold Prices
On the U.S. side, the US dollar continued its upward trend, remaining well-supported around the multi-week high reached last Friday. This strength is driven by a reduction in investor expectations for an aggressive rate cut by the Federal Reserve in November, which has placed additional pressure on gold prices, pushing them below the $2,630 support level. According to the CME Group's FedWatch Tool, there is now an 85% chance of a 25-basis-point rate cut in November, with a 50-basis-point cut anticipated by year-end.
Fed officials have conveyed mixed signals regarding interest rate policy. New York Fed President John Williams suggested that a gradual reduction in interest rates is appropriate, using the September 50-basis-point cut as a reference for future actions. In contrast, Fed Governor Adriana Kugler emphasized that policy decisions would be data-driven, indicating that more cuts could occur if inflation continues to improve.
Meanwhile, Boston Fed President Susan Collins pointed out that while inflation is cooling, the U.S. economy and labor markets remain robust. Fed Vice Chair Philip Jefferson also noted that economic growth is solid, inflation has eased, and the labor market has cooled from its previous overheating.
In the meantime, the 10-year U.S. government bond yield remains above 4%, exerting further pressure on gold. As a result, the reduced expectations for aggressive Fed rate cuts, coupled with strong U.S. economic data, have bolstered the US dollar, pushing gold prices lower.
Easing Geopolitical Tensions and Technical Selling Pressure Gold Prices Downward
On the geopolitical front, Iran-backed Hezbollah indicated on Tuesday that it might be willing to consider a ceasefire without requiring an end to the Gaza war as a precondition. This development has sparked hopes for reduced tensions between Lebanon and Israel, which could diminish the demand for safe-haven assets like gold. Consequently, the combination of easing geopolitical tensions and technical factors is contributing to the current downturn in gold prices.
GOLD (XAU/USD) - Technical Analysis
Gold (XAU/USD) is currently trading lower at $2,613.02, down 0.34% for the day, signaling continued selling pressure as the metal struggles to hold above critical support levels. On the 4-hour chart, gold is trading below the pivot point at $2,623.02, indicating a bearish outlook in the near term. Immediate resistance is seen at $2,632.79, with additional hurdles at $2,640.56 and $2,655.51 if buying interest picks up.
On the downside, immediate support is located at $2,606.30, followed by deeper support levels at $2,596.45 and $2,586.52. The 50-day Exponential Moving Average (EMA) at $2,635.53 suggests a strong resistance level, reinforcing the bearish sentiment. The Relative Strength Index (RSI) stands at 37, indicating the metal is approaching oversold territory, which may suggest a potential rebound if prices stabilize above the $2,620 mark.
Given the bearish momentum, traders may consider selling below $2,620 with a target at $2,606, while a stop-loss order above $2,627 could limit risk. A decisive break below $2,606 could accelerate selling pressure, driving prices toward the next support level at $2,596. Conversely, a recovery above $2,623 could signal a reversal, with potential gains toward $2,635.
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