Gold stays in a range after the collapse of the Fed’s hawkish bets, safe haven demand supports it

• Gold swings in a tight range after bets that the Fed will continue to aggressively cut interest rates fade.
• Support for Gold comes from rising geopolitical risks and lower interest rates globally.
• Technically, XAU/USD starts a lower leg within a tight range.

Gold (XAU/USD) falls to trade at $2,640 per troy ounce on Thursday as it continues its dance below the record high of $2,685 set last week. Sellers have the advantage over buyers as bets that the Federal Reserve (Fed) will continue to aggressively cut interest rates in the United States (US) fade, which, in turn, takes the shine off assets that do not generate interest such as Gold.

The downside is limited, however, by support from two key factors: safe-haven flows into Gold due to fears of an escalation of the conflict in the Middle East and the general downward trend in global interest rates – a despite the Fed’s newfound caution – allowing Gold to still maintain its overall appeal to investors.

Gold halts its rise as the Fed retreats

Gold continues to see its upside limited by fluctuating expectations about the future course of US interest rates. With the Fed likely to cut interest rates by another 50 basis points (0.50%) again in November, sitting above 60% last week, these have now fallen to a much less secure level of around 30%.

The drop in market bets comes after the release of stronger-than-expected US employment data, suggesting the US economy is not on the brink. This, in turn, has allowed the Dollar to rebound from its deep decline in August, providing a new headwind for Gold, which is primarily priced and traded in USD. Regarding the health of the US labor market, the release of the most important US employment report, Non-Farm Payrolls (NFP), will be a critical deciding factor on Friday.

Technical Analysis: Gold enters short-term sideways mode

Gold enters a sideways market mode on the 4-hour chart (below) between the all-time high of $2,685 and a bottom around Monday’s low of $2,625. The short-term trend is unclear and could now be sideways. A breakout either above the top of the range or below the bottom would be required to confirm a new directional bias.

XAU/USD 4-hour chart

A break above Tuesday’s high of $2,673 would, however, increase the odds of a resumption of the old uptrend, likely leading to a continuation to the round number target at $2,700.

Gold is attempting to break through the 50 SMA on the chart above, suggesting increasing downside pressure.

If a break through the SMA occurs, it will likely take prices to support from the trend line at $2,630. A break below the $2,625 low would likely see prices give way to support at $2,600 (Aug 20 high, round number).

In the medium to long term, Gold remains in an uptrend and since it is a fundamental principle of technical analysis that “the trend is your friend”, the odds favor an eventual resumption to the upside once the current period of consolidation has passed. finished.