- Gold prices remain on the defensive as expectations for a 50bps Fed rate cut in November fade.
- USD further consolidates last week’s strong rally and also contributes to the upper bound of XAU/USD.
- Geopolitical risks continue to provide a tailwind, potentially limiting losses for precious metals.
Gold prices (XAU/USD) continue to struggle to gain meaningful traction, remaining within the familiar range it has held over the past week or so amid mixed fundamental indicators. Investors further dialed back hopes for more aggressive policy easing from the Federal Reserve after Friday's big U.S. jobs report. This has helped the US dollar (USD) sustain its recent strong gains to a seven-week high, creating a headwind for yield-free gold prices.
Meanwhile, easing concerns about the US economic slowdown and optimism about China's economic stimulus measures remain supportive of the market's upbeat mood. This further contributes to capping the upside in gold prices. Still, the risk of further escalating geopolitical tensions in the Middle East is a tailwind for safe-haven precious metals, helping to limit any significant declines in the absence of market-driving US macro data on Monday. Probably.
Daily Digest Market movers: Gold bulls remain on the sidelines amid mixed fundamentals
- Friday's big US jobs details dampened market expectations for more aggressive policy easing by the Federal Reserve and continues to undermine demand for non-yielding gold prices.
- The U.S. Department of Labor reported economic growth in September was much stronger than expected, adding 254,000 jobs and the unemployment rate unexpectedly fell from 4.2% to 4.1%.
- Additional details show that 72,000 jobs were added in July and August than previously reported, suggesting the labor market remains resilient and the economy is in much better shape. It shows.
- Traders now believe there is a nearly 95% chance the Fed will cut borrowing costs by 25 basis points at the end of its November policy meeting, according to CME Group's FedWatch tool.
- The XAU/USD bulls remain on the defensive as the benchmark 10-year US Treasury yield remains near the 4.0% level, while the US dollar remains elevated near seven-week highs. There is.
- An upbeat US NFP report eased concerns about an economic slowdown and, along with optimism over China's stimulus, remains supportive of a positive mood in stock markets.
- Israel has carried out heavy shelling on Jabalia refugee camp in the Gaza Strip and launched new airstrikes in Lebanon. In retaliation, Hezbollah attacked Haifa, Israel, on Monday morning.
- This development raises the risk of a full-scale war in the Middle East and could continue to benefit the commodity's safe-haven status, requiring some degree of vigilance from bearish traders.
- China's gold reserves remained unchanged for the fifth consecutive month, at 72.8 million fine troy ounces at the end of September, according to official data released early on Monday.
Technical outlook: Gold prices expand for next rally
From a technical perspective, the price action within the range could still be classified as a bullish consolidation phase on the back of the recent strong rally towards a record peak. Additionally, the oscillator on the daily chart remains comfortably in positive territory, easing out of the overbought zone. This similarly suggests that the path of least resistance continues for gold prices to the upside, supporting the prospect of an eventual breakout of the upside. That said, it would be wise to wait for buying above the $2,670-$2,672 hurdle before making any new bullish bets. This is followed by an all-time high in the $2,685-$2,686 zone and the $2,700 mark, which, if cleared, would set the stage for an extension of the months-long established uptrend.
Conversely, the lower end of the aforementioned trading range near $2,630 may continue to provide near-term support for gold prices and serve as an important focal point for short-term traders. A convincing breakout could prompt a technical sell-off, pushing XAU/USD below $2,600 and towards the next associated support near the $2,560 zone. The correctional decline could extend further towards the next relevant support around the $2,535-$2,530 area, on the way to the psychological mark of $2,500.
