GOLD Price Analysis – Oct 21, 2024
Daily Price Outlook
Gold prices (XAU/USD) started this week on a bullish trend and maintain their intraday gains during the early European session, trading around the all-time high of $2,731. However, the easing of monetary policies and ongoing geopolitical tensions in the Middle East have created a bullish environment for the non-yielding yellow metal. Moreover, uncertainty in US politics has contributed to the recent upward momentum over the past couple of weeks.
At the same time, expectations of modest rate cuts from the Federal Reserve have supported US Treasury bond yields, which, in turn, boosted the US Dollar. The USD Index (DXY) is now nearing its highest level since early August. Hence, this strength in the Dollar, along with slightly overbought technical conditions, could limit further gains in Gold in the near term.
US Dollar Strength and Geopolitical Risks Shape Gold Price Trends
On the US front, the broad-based US Dollar has gained bullish traction as expectations of modest rate cuts by the Federal Reserve (Fed) help keep US Treasury yields higher. However, the USD Index (DXY), which tracks the dollar against a basket of major currencies, is inching closer to its highest level since August. Investors have ruled out the possibility of a large interest rate cut by the Fed in November, as the US economy continues to show resilience in recent macroeconomic data.
Fed officials, like Atlanta Fed President Raphael Bostic, have indicated that they're not in a hurry to cut rates, with expectations that rates will eventually fall to around 3-3.5% by the end of next year. In contrast, weak inflation data from the UK has fueled expectations of more aggressive easing from the Bank of England. Despite higher US bond yields, the positive trend in Gold prices remains intact, driven by safe-haven demand amid geopolitical risks and broader market uncertainties.
Therefore, the strengthening US dollar and higher Treasury yields may limit further gains in Gold prices. However, ongoing geopolitical risks and market uncertainties continue to drive safe-haven demand, keeping the precious metal's upward trend intact despite these headwinds from the Dollar.
Geopolitical Tensions and Political Uncertainty Fuel Gold Prices to New Highs
On the other hand, the increasing geopolitical tensions in the Middle East continue to boost Gold prices. Despite the killing of Hamas leader Yahya Sinwar, the conflict shows no signs of easing, as Israel prepares to respond to Iran’s October strike. Israel’s Prime Minister, Benjamin Netanyahu, remains determined to continue the war despite attacks by Hezbollah.
However, the situation has escalated with Israeli airstrikes across Lebanon and intensified attacks in Gaza, raising fears of a larger regional conflict. This has heightened safe-haven demand for Gold, helping it maintain its upward momentum and reach a new all-time high during the Asian session on Monday.
In addition to geopolitical risks, political uncertainty in the US also supports Gold's rise. Recent polls show a tight race between Donald Trump and Vice President Kamala Harris, adding to market uncertainty and boosting demand for Gold. Furthermore, investors welcomed two new funding schemes launched by the People's Bank of China on Friday, aimed at supporting capital market development.
These combined factors have helped Gold reach a fresh all-time high during the Asian session on Monday, continuing its strong upward trend.
GOLD (XAU/USD) – Technical Analysis
Gold (XAU/USD) is trading at $2,721.90, showing an intraday increase of 0.06%. The market sentiment remains bullish as prices hold above critical support levels.
Gold continues to extend its bullish momentum, with prices maintaining an upward channel formation. On the 2-hour chart, XAU/USD has bounced off its immediate support level at $2,713.94, driven by buying interest around this key pivot zone. The precious metal is steadily climbing towards the next resistance levels, suggesting a possible rally if prices break through the critical barrier of $2,732.08.
Technical indicators also reinforce this positive outlook. The Relative Strength Index (RSI) is currently hovering at 69.44, suggesting a moderately overbought condition but still leaving room for potential gains. The 50-period Exponential Moving Average (EMA) is positioned at $2,678.89, offering solid support to the ongoing trend.
Should gold hold above $2,714.00, the immediate upside target lies at $2,732.00. A breakout above this resistance would open the door for a further advance towards the $2,740 level. However, failure to maintain the $2,713 support could result in a pullback, with next support levels at $2,703.00 and $2,693.00.
Conclusion: The overall outlook for gold remains bullish as long as prices stay above $2,714. Entry points for traders may include buying above $2,714 with a take-profit target of $2,732 and a stop-loss at $2,703. The RSI and 50 EMA suggest positive momentum, making the current price zone an attractive entry for upward positions.
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