GOLD Price Analysis – Oct 28, 2024
Daily Price Outlook
Gold prices (XAU/USD) have struggled to stop its downward trend but remined bearish around $2,732. However, the US dollar is gaining strength, driven by rising Treasury yields, which was seen as a key factor putting pressure on gold.
Many investors are shifting their expectations, anticipating only modest rate cuts from the Federal Reserve, which further weighs on the precious metal. Apart from this, the risk-on market sentiment has also limited demand for gold as a safe-haven asset.
On the flip side, losses in gold might be limited due to ongoing tensions in the Middle East and concerns surrounding the upcoming US elections, which are increasing demand for safe-haven assets and providing some support for prices.
Looking forward, traders appear hesitant to make strong moves in gold as they await several key US economic reports this week, including the Q3 GDP, the PCE Price Index, and the Nonfarm Payrolls (NFP) report.
Strengthening US Dollar and Economic Optimism Put Pressure on Gold Prices
On the US front, the broad-based US dollar is edging higher amid growing expectations that the Federal Reserve will opt for smaller rate cuts. Recently, the dollar reached its highest level since July 30, buoyed by market speculation for a more measured approach to easing monetary policy.
According to the CME Group's FedWatch Tool, traders have nearly fully priced in a standard 25 basis points rate cut by the Fed at its upcoming November meeting.
Looking at US economic data, recent indicators have reinforced this bullish outlook. In September, Durable Goods Orders fell by 0.8%, which is better than the anticipated 1% drop, and orders excluding transportation increased by 0.4%.
Meanwhile, the University of Michigan’s Consumer Sentiment Index for October rose to a six-month high of 70.5, surpassing both the preliminary estimate and last month’s figure.
Therefore, the bullish US dollar, driven by rising Treasury yields and positive economic data, makes gold less attractive as a non-yielding asset. Consequently, this upward pressure on the dollar and expectations of smaller Fed rate cuts can depress gold prices.
Geopolitical and Economic Shifts Could Weaken Gold's Safe-Haven Appeal
On the geopolitical front, Iran announced on Saturday that it would refrain from retaliating against Israeli airstrikes on its military targets, provided a ceasefire agreement is reached for the ongoing conflict in Gaza and Lebanon.
This statement suggests that Iran may prioritize diplomacy over military action to stabilize the situation.
Meanwhile, China is taking steps to boost its economy as it enters the fourth quarter. On Monday, Vice Minister of Finance Liao Min stated that the country will enhance its macroeconomic policies to support economic recovery.
This indicates that China is actively seeking ways to stimulate its economy and strengthen growth as it faces various challenges.
Hence, Iran's restraint in retaliation ease geopolitical tensions, reducing safe-haven demand for gold. Meanwhile, China's efforts to stimulate economic growth could strengthen the yuan, further pressuring gold prices as investors shift towards riskier assets and away from precious metals.
GOLD (XAU/USD) – Technical Analysis
Gold (XAU/USD) is experiencing a mild downturn as it tests the critical support level near $2,724.61. The 50-day Exponential Moving Average (EMA) at $2,732.56 is in close alignment with the current price, acting as a pivotal point that could determine the next directional move.
The Relative Strength Index (RSI) stands at 48, signaling a neutral momentum and leaving room for potential upside if the price can hold above the $2,726 pivot level. A solid rebound from this area could see Gold challenging immediate resistance at $2,741.59, with further targets set at $2,750.07 and $2,758.54.
On the downside, a decisive break below $2,724.61 could expose Gold to lower support levels at $2,717.49 and $2,708.90, reflecting potential selling pressure. Given the global economic uncertainty, Gold's price action remains sensitive to shifts in investor sentiment, which often directs funds toward safe-haven assets.
For traders considering entry, a buy-limit order near $2,726 could yield a favorable risk-to-reward scenario, targeting the $2,741 resistance. This setup anticipates a potential bounce while safeguarding against deeper declines with a stop loss set just below $2,717. Overall, maintaining a watch on key levels around the pivot and EMA will be crucial for gauging further price movements.
Conclusion: Gold’s price trajectory hinges on the $2,726 pivot level, with a potential upside to $2,741 if support holds. A break below this level could trigger further downside, while a buy-limit entry at $2,726 offers an opportunity for gains with limited risk.
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