GOLD Price Analysis – Oct 14, 2024
Daily Price Outlook
During the early part of the European session on Monday, gold prices (XAU/USD) maintained an upward trend, rising to around 2,665, with an intraday high of 2,666. However, the expectations that the Federal Reserve will continue cutting interest rates, supported by a favorable inflation outlook, have been a key driver for flows toward the non-yielding yellow metal. Apart from this, escalating geopolitical tensions in the Middle East provide further support for safe-haven bullion.
Meanwhile, US Treasury bond yields and the US dollar remain higher due to rising bets for a less aggressive policy easing by the Fed. This, coupled with a positive risk tone and optimism over China’s pledge to increase debt to revive its economy, limit any further gains for gold.
Looking forward, traders seem cautious to place strong positions as the US market is closed on Monday for the Columbus Day holiday, leaving XAU/USD vulnerable to USD price dynamics and fresh geopolitical developments. This uncertainty may lead to fluctuations in gold prices until the market reopens.
Gold Prices Rise Amid Fed Rate Cut Expectations and Inflation Slowdown
Despite higher US Treasury bond yields due to rising bets for less aggressive policy easing by the Federal Reserve (Fed), the broad-based US dollar struggled to gain traction and showed a mild bearish trend. This has led to fresh buying pressure on gold prices at the start of the new week. The market’s focus remains on expectations that the Fed will continue cutting interest rates, driven by a favorable inflation outlook. These expectations support flows toward gold, which is a non-yielding asset.
On the data front, the US Bureau of Labor Statistics reported that the headline Producer Price Index (PPI) for final demand increased by 1.8% in September, while the core gauge rose by 2.8% year-over-year. Although these readings were slightly above consensus estimates, they indicate a slowdown in price increases, which may allow the Fed to continue lowering interest rates.
According to the CME Group's FedWatch Tool, there is currently over a 90% chance that the Fed will cut borrowing costs by 25 basis points in November. However, the yield on the benchmark 10-year US government bond remains steady above 4%, supporting the US dollar near a two-month peak.
Therefore, the expectation of continued interest rate cuts by the Federal Reserve, combined with a slowing inflation rate, boosts demand for gold as a safe-haven asset. However, higher US Treasury yields could limit significant gains for gold prices.
GOLD (XAU/USD) - Technical Analysis
Gold (XAU/USD) is trading at $2,663.50, up 0.24%, as bullish momentum continues to drive prices higher. The immediate pivot point stands at $2,655, and gold is showing resilience above this level, supported by broader inflation concerns and geopolitical uncertainties. Immediate resistance is at $2,670, followed by stronger resistance at $2,684 and $2,699. A break above these levels could signal further bullish movement.
On the downside, immediate support is at $2,642, with further levels of defense at $2,625 and $2,606. A drop below $2,642 would suggest a shift in sentiment, potentially triggering selling pressure. The 50-day Exponential Moving Average (EMA) at $2,630 is providing solid support, reinforcing the bullish outlook as long as prices remain above this threshold.
From a technical standpoint, the Relative Strength Index (RSI) currently sits at 69, indicating bullish momentum but nearing overbought territory. Traders should watch for potential exhaustion as prices approach the key resistance zone. However, as long as gold holds above the $2,655 pivot point, the outlook remains constructive for further upside.
The strategy here would be to buy on dips above $2,660, with an ideal take profit target at $2,684. A stop-loss should be placed around $2,642 to mitigate downside risk in case of a reversal.
Gold remains in a positive technical posture, but traders should be cautious of overbought signals and prepare for potential pullbacks if support at $2,642 fails to hold.
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