GOLD Price Analysis – Oct 23, 2024
Daily Price Outlook
Gold (XAU/USD) is on a remarkable upward trend, breaking into the $2,750 level on Wednesday and setting new all-time highs. This surge is largely fueled by a heightened demand for safe havens as tensions continue to escalate in the Middle East and uncertainty looms over the upcoming elections in the US.
With former President Donald Trump and Vice President Kamala Harris locked in a tight race in the polls, the prospect of a Trump win raises concerns about stability on the geopolitical front.
Rising Geopolitical Tensions in the Middle East Fuel Gold Price Surge
On the geopolitical front, the increasing tension in the Middle East is pushing gold prices higher as investors seek safe-haven assets. Despite efforts for a ceasefire, fighting continues between the Israeli army, Hamas, and Hezbollah in Gaza and Lebanon.
The death of Hamas leader Yahya Sinwar has not opened any new avenues for negotiations, which many had hoped for. U.S. Secretary of State Antony Blinken, on his eleventh visit to the region, appears no closer to securing a ceasefire, even as reports suggest progress. Recently, he had to take cover in a bunker during air-raid sirens in Tel Aviv.
However, the situation is escalating, with the Israeli military launching attacks on the ancient city of Tyre in Lebanon after warning residents to evacuate. Furthermore, conflict is expected to intensify as Israel prepares for a potential retaliatory strike against Iran.
This urgency follows an incident where an Iranian drone breached Israeli air defenses and exploded near Prime Minister Benjamin Netanyahu’s residence.
Impact of Strengthening US Dollar and Rate Cut Expectations on Gold Prices
On the US front, the broad-based US dollar is gaining strength as recent signs of economic resilience and inflation concerns reduce the likelihood of significant interest rate cuts by the Federal Reserve in November.
The CME FedWatch Tool shows a 91% chance of a modest 25-basis-point rate cut, but expectations for a larger 50-basis-point cut are absent. Currently, the yields on 2-year and 10-year US Treasury bonds are 4.04% and 4.21%, respectively.
Federal Reserve Bank of Minneapolis President Neel Kashkari noted that the Fed is carefully watching the labor market for any signs of instability. He advised investors to prepare for a gradual pace of rate cuts in the upcoming quarters, indicating that any easing will be moderate rather than aggressive.
Meanwhile, San Francisco Fed President Mary Daly expressed support for further easing, believing there is no reason to stop lowering rates.
In contrast, Kansas City Fed President Jeffrey Schmid took a more cautious stance, suggesting restraint in large rate cuts and emphasizing that the labor market is stabilizing rather than deteriorating.
Consequently, the strengthening US dollar and reduced expectations for significant interest rate cuts may pressure gold prices, as higher interest rates typically increase the opportunity cost of holding non-yielding assets like gold. This could lead to decreased investor demand for gold.
GOLD (XAU/USD) – Technical Analysis
Gold prices (XAU/USD) continued their modest upward trend on Wednesday, edging 0.04% higher to $2750.14 during the early European session. The precious metal remains buoyant, underpinned by global macroeconomic concerns and a weakening U.S. dollar, providing solid ground for bullish sentiment.
On the 4-hour chart, key technical levels reveal that Gold is positioned just above its pivot point of $2739.97, which could act as a critical marker for further upside momentum. Immediate resistance stands at $2752.73, followed by stronger hurdles at $2764.86 and $2776.39. If prices close above the immediate resistance level, Gold may gather enough momentum to test the higher resistance at $2764.86.
On the downside, initial support lies at $2729.46, with subsequent supports at $2716.59 and $2701.94. A breach of $2729.46 could trigger a deeper corrective pullback toward these lower levels.
From a technical standpoint, the Relative Strength Index (RSI) is currently at 66.00, indicating that Gold is nearing overbought territory but still has room for upward movement before significant correction risk emerges.
The 50-day Exponential Moving Average (EMA) of $2718.48 provides additional bullish confirmation, as prices remain comfortably above this key moving average, suggesting ongoing bullish strength in the short term.
For traders looking for entry points, the outlook remains positive with a buy entry above $2740, targeting the next resistance at $2764. However, caution is warranted with a stop loss at $2729 to manage downside risks.
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