GOLD Price Analysis – Oct 17, 2024
Daily Price Outlook
Gold prices (XAU/USD) maintained a bullish trend, climbing for the third consecutive day and reaching a fresh all-time high of 2,685 ahead of the European session on Thursday. This bullish momentum is supported by weak inflation data from Europe and the UK, which have heightened expectations for more aggressive monetary easing by both the European Central Bank (ECB) and the Bank of England (BoE). Apart from this, the ongoing speculation of a 25 basis point (bps) rate cut by the Federal Reserve in November has bolstered demand for the non-yielding yellow metal.
Moreover, the escalating conflicts in the Middle East have heightened the appeal of gold as a safe haven. Nevertheless, traders have moderated their expectations for more aggressive easing by the Fed, which has led to higher US Treasury bond yields. This keeps the US Dollar (USD) near its highest level since early August, limiting the upside for gold.
Weak Inflation and Central Bank Actions Heighten Gold Demand
As we mentioned, weak inflation data from Europe and the UK has increased expectations for more aggressive policy easing by the European Central Bank (ECB) and the Bank of England (BoE). This aligns with predictions of a 25 basis point (bps) rate cut by the Federal Reserve (Fed) in November, supporting demand for gold, a non-yielding asset.
Notably, the ECB is expected to announce its third interest rate cut of the year this Thursday, while falling UK inflation strengthens the case for a BoE rate cut next month. Meanwhile, the CME Group's FedWatch Tool shows over a 90% probability of a 25 bps rate cut from the Fed, which has lowered US bond yields to a one-week low.
As a result, the US Dollar has continued its upward trend, reaching its highest level since early August, but this hasn’t deterred gold buyers. Moving ahead, traders will watch key US economic data, including Retail Sales, Weekly Initial Jobless Claims, and the Philly Fed Manufacturing Index. In the meantime, the ECB’s monetary policy decision may also increase market volatility and provide opportunities for traders, especially in the safe-haven gold market.
Geopolitical Tensions and Central Bank Purchases Drive Demand for Gold
Apart from this, recent comments from officials at the London Bullion Market Association's annual conference indicate that central banks are continuing to purchase gold. They are doing this to diversify their reserves for both financial stability and strategic reasons. This trend highlights gold's ongoing importance as a safe-haven asset amid global uncertainties.
In southern Lebanon, the United Nations (UN) reported that Israeli forces have fired at its peacekeeping position, forcibly entered a base, and halted critical logistical movements. This situation has resulted in injuries to more than a dozen UN troops. The escalating tensions in this region raise concerns about stability and security in the area.
Furthermore, a source familiar with the situation revealed that Israel has prepared a plan to respond to Iran’s attack on October 1. This development heightens the risk of further geopolitical tensions and could lead to a full-scale war in the Middle East.
In another part of the world, China’s housing minister announced plans to add 1 million village urbanization projects and implement monetization measures for these initiatives, reflecting the government's commitment to urban development.
Therefore, the ongoing geopolitical tensions, particularly in the Middle East, coupled with central banks' increased gold purchases for diversification, are likely to boost demand for gold as a safe-haven asset, driving prices higher amid market uncertainties and global instability.
GOLD (XAU/USD) – Technical Analysis
Gold (XAU/USD) is showing bullish momentum, trading at $2,682.10, up 0.36% on the day. The 4-hour chart reveals that the price is approaching a critical resistance at $2,674.26, which, if broken, could trigger further gains toward the next resistance levels at $2,685.25 and $2,694.23. However, a failure to break this level may see gold retreat to immediate support at $2,655.79, with further support lying at $2,646.42 and $2,637.84.
From a technical perspective, the 50-day Exponential Moving Average (EMA) at $2,659.66 is providing solid support, suggesting a positive outlook for gold as long as the price remains above this level. The Relative Strength Index (RSI) is currently at 63, indicating a bullish trend without reaching overbought territory, leaving room for further upward movement.
The pivot point at $2,693.00 serves as a key indicator, with potential gains if prices surpass this level. Traders may look to enter positions above $2,674, aiming for a take-profit target around $2,693. However, caution is advised if the price falls below $2,665, where a stop-loss could help mitigate risks in a downward scenario.
Overall, gold remains bullish as long as the price holds above the $2,674 mark, supported by strong technical indicators. A break above immediate resistance could see gold testing new highs, while a drop below key support may signal a short-term pullback.
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