GOLD Price Analysis – Oct 11, 2024
Daily Price Outlook
Gold (XAU/USD) continued its upward trend, remaining well-supported around the 2,639 mark and reaching an intra-day high of 2,647. This momentum was fueled by weak US jobs data, which reinforced expectations for a Federal Reserve (Fed) rate cut in November.
Such a rate cut typically enhances gold's appeal, as it reduces the opportunity cost of holding this non-yielding asset, making it more attractive to investors.
However, the recent US Jobless Claims report revealed an unexpected increase in unemployment claims, contributing to a dip in US Treasury yields and a slight weakening of the US dollar. This environment further bolstered gold prices.
Moreover, safe-haven inflows into gold have increased amid escalating geopolitical tensions. Israel has intensified its bombings of Hezbollah targets in Lebanon, resulting in significant collateral damage, while fears of Israel's potential retaliation against Iran add to market uncertainty and elevate demand for the precious metal.
US Economic Data and Fed Policy Shift Boost Gold Prices Amid Job Market Weakness
On the US front, the broad-based US dollar weakened slightly on Thursday after a surprise rise in jobless claims, which showed 258K new claims, much higher than the expected 230K.
This rise in unemployment claims, partly attributed to people leaving Florida ahead of Hurricane Milton, signaled some weakness in the job market.
US Treasury yields dipped, and gold prices rebounded from just above the $2,600 psychological level.
Continuing jobless claims also increased to 1.861 million, indicating a slowing labor market, which could lead the Federal Reserve to cut interest rates at its November meeting to stimulate the economy.
Despite slightly higher-than-expected inflation figures, with September’s Consumer Price Index (CPI) showing a 2.4% year-over-year increase, the Fed appears to be focusing more on employment than inflation.
This led to an increase in market expectations for a 25-basis-point rate cut in November, with an 89% probability according to the CME FedWatch tool.
Upcoming economic data, including the Producer Price Index (PPI) and the US Michigan Consumer Sentiment survey, could further impact gold prices, but any significant effect is expected only if the data surprises market forecasts.
Therefore, the rising US jobless claims and the Fed's focus on employment over inflation boosted gold prices, as it increased expectations of a Fed rate cut in November, making gold more attractive as a safe-haven asset amid economic uncertainty.
Rising Geopolitical Tensions Fuel Safe-Haven Demand for Gold
On the geopolitical front, tensions are rising as Israel intensifies airstrikes on Hezbollah targets in Lebanon, resulting in at least 22 deaths and many injuries. This marks the deadliest attack in Beirut since 2006, aimed at a location where a senior Hezbollah official was present, though he survived.
Meanwhile, a UN inquiry has accused Israel of intentionally damaging Gaza's healthcare system during its conflict with Hamas, describing these actions as potential war crimes.
Israel's military has confirmed it killed a commander from Hezbollah and targeted several facilities in southern Lebanon.
As tensions escalate, the Israeli security cabinet is discussing its response to recent missile attacks from Iran, with U.S. President Joe Biden urging a "proportional" reaction.
Consequently, the rising geopolitical tensions and conflict in the Middle East are driving safe-haven demand for gold.
Investors often turn to gold during periods of uncertainty and violence, leading to increased prices as they seek stability amid the escalating risks.
GOLD (XAU/USD) - Technical Analysis
Gold (XAU/USD) is currently trading at $2,639.53, up 0.42% on the day, as the metal consolidates above its immediate support at $2,619.22. The price remains below the pivot point of $2,655.00, suggesting that bullish momentum is cautiously building.
However, the metal faces a significant challenge near $2,654.00, where the 50-day Exponential Moving Average (EMA) at $2,640.54 is capping further gains.
A sustained move above the $2,655 resistance could open the path toward the next resistance levels at $2,670.00 and $2,686.09.
On the downside, a failure to maintain levels above $2,632 could trigger a short-term correction, exposing gold to immediate support at $2,619.22, followed by deeper levels at $2,605.24 and $2,592.16.
The Relative Strength Index (RSI) stands at 55, reflecting moderate bullish sentiment but lacking strong momentum to push the price beyond the key $2,655 level.
If prices close above $2,655, gold could target $2,670 and potentially test $2,686.09 in the near term. However, if sellers regain control and drive the price below $2,619.22, a drop toward $2,605.24 could ensue, signaling potential downside risks.
Overall, the short-term outlook for gold remains cautiously bullish above $2,632. A breakout above $2,655 would confirm renewed upward momentum, while a dip below $2,619.22 could shift the trend toward a bearish stance.
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