- Gold is trading at $2,645, down 0.30%, while 10-year US Treasury yields rise to 4.026%, limiting further gains.
- The escalation of the conflict in the Middle East involving Israel, Hamas and other groups such as the Houthis supports gold amid risk-averse sentiment.
- Market expectations for a 25bp Fed rate cut remain high at 83.5%, while a 50bp cut is out of the question for now.
Gold price declines during the North American session on Monday, but remains within the range of $2,630 – $2,659 as US Treasury yields limited the yellow metal’s advance, while the rally in the Conflict in the Middle East prevents the precious metal from falling further. XAU/USD is trading at $2,645, down 0.30%.
Market sentiment has deteriorated due to the war in the Middle East. The exchange of fire continued as Israel continued its ground operations in Lebanon, while Hamas launched rockets into Tel-Aviv. Hopes for a ceasefire faded as the conflict widened, involving other groups such as the Houthis attacking ships in the Red Sea.
Meanwhile, the latest stellar US Nonfarm Payrolls report in September caused a jump in US Treasury yields.
Traders ruled out a 50 basis point (bp) cut by the Federal Reserve (Fed), according to data from the CME’s FedWatch tool. The odds of a 25bp Fed rate cut are 83.5%. Meanwhile, the chances of cutting rates by 50 bps are 0%, but increased to 16.5% for a pause.
The 10-year US Treasury yield rises more than five and a half basis points to 4.026% as traders appear confident that the Fed will reduce borrowing costs by 25 bps at each of the last two policy meetings in 2024.
Meanwhile, the dollar is clinging to minimal gains as the US Dollar Index (DXY), which tracks the value of the dollar against a basket of six currencies, is at 102.52, virtually unchanged but at levels not seen since August 2024.
Next week, the US agenda will include the release of inflation data, the latest Fed meeting minutes, jobless claims and the University of Michigan Consumer Sentiment.
Daily Moves and Market Drivers: Gold Price Falls Amid Easing US Recession Fears
- Following the latest US jobs report, recession fears faded. Therefore, most Wall Street banks such as Citi, JP Morgan and Bank of America revised their Fed forecast for November from a 50 to 25 bp cut.
- Minneapolis Fed President Neel Kashkari said he sees no signs of “resurgent inflation” and is confident inflation is returning to 2%.
- Meanwhile, the People’s Bank of China (PBoC) paused its bullion purchases for the fifth month. China’s reserves were unchanged, as its holdings stood at 72.8 million troy ounces at the end of last month.
XAU/USD Technical Analysis: Gold Price Falls as Sellers Target Support Below $2,650
Gold price remains bound within a trading range, while the Relative Strength Index (RSI) suggests a decline is underway despite printing bullish readings. Still, the slope is accelerating downward, approaching the neutral line.
If XAU/USD falls below the September 30 low of $2,624, that could support a drop towards the $2,600 mark. On further weakness, the next bottom will be the 50-day SMA at $2,531.
On the other hand, if gold closes daily above $2,650, XAU/USD needs to break above $2,670 to challenge the year-to-date high of $2,685. Next will be the $2,700 mark.
Gold FAQs
Gold has played a fundamental role in human history, as it has been widely used as a store of value and medium of exchange. Today, apart from its brilliance and use for jewelry, the precious metal is considered a safe-haven asset, meaning it is considered a good investment in turbulent times. Gold is also considered a hedge against inflation and currency depreciation, since it does not depend on any specific issuer or government.
Central banks are the largest holders of Gold. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and purchase Gold to improve the perception of strength of the economy and currency. High Gold reserves can be a source of confidence for the solvency of a country. Central banks added 1,136 tons of gold worth about $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the largest annual purchase since records exist. Central banks in emerging economies such as China, India and Türkiye are rapidly increasing their gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are the main reserve and safe haven assets. When the Dollar depreciates, the price of Gold tends to rise, allowing investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken the price of Gold, while sell-offs in riskier markets tend to favor the precious metal.
The price of Gold can move due to a wide range of factors. Geopolitical instability or fear of a deep recession can cause the price of Gold to rise rapidly due to its status as a safe haven asset. As a non-yielding asset, the price of Gold tends to rise when interest rates fall, while rising money prices tend to weigh down the yellow metal. Still, most of the moves depend on how the US Dollar (USD) performs, as the asset is traded in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold in check, while a weaker Dollar is likely to push up Gold prices.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
