Gold Prices Navigate Uncertainty Dollar Rates and Geopolitics
Updated
Gold prices, represented as XAU/USD, started the new week on a weaker note, extending the decline that began on Friday from the $2,004 level, which marked a multi-day high. This initial rise was in response to softer jobs data from the United States (US). A slight increase in US Treasury bond yields helped alleviate some of the bearish pressure on the US Dollar (USD) and had an impact on the precious metal. Additionally, a generally positive tone in the equity markets pushed the safe-haven commodity below the $1,985 level during the Asian trading session.
However, it's important to note that there are growing expectations that the Federal Reserve (Fed) will keep things unchanged in December and may not raise interest rates any further, which could limit the upside potential for the USD. This, in turn, might offer some support to gold, which is considered a non-yielding asset. Moreover, the ongoing risk of an escalation in the Israel-Hamas conflict is another factor that may prevent a significant decline in XAU/USD. Therefore, it might be wise to wait for strong sustained selling pressure before considering a substantial correction from the year-to-date peak reached on October 27.
The US Dollar is making a modest recovery from a six-week low it hit on Friday, thanks to a decent increase in US Treasury bond yields. This, in turn, is contributing to the downward pressure on gold. However, the prevailing market sentiment is that the Federal Reserve won't raise rates again, especially given the softer US macroeconomic data released on Friday. For instance, the non-farm payroll (NFP) report showed that the US added 150,000 jobs in October, falling short of the estimated 180,000 and revised down from the originally reported 336,000 for the previous month. The US ISM Non-Manufacturing PMI also dropped to a five-month low of 51.8 in October, reinforcing expectations that the Fed will maintain its current stance at the December policy meeting.
On the geopolitical front, there's ongoing tension in the Israel-Hamas conflict, with Israel rejecting calls for a ceasefire and intensifying military operations against Hamas in Gaza. This situation continues to influence the dynamics of gold prices.
From a technical perspective, any further decline in gold prices may find support around the $1,980 level, followed by the previous week's high near $1,970. If there's a continued downward trend, the price of gold may face additional pressure, potentially dropping towards the $1,964 area, with the next significant support in the $1,954-1,953 range.
Conversely, if gold prices rebound, the $2,000 mark could serve as an immediate resistance level, followed by the Friday swing high around $2,004, and the year-to-date peak near $2,009. If gold manages to break through this resistance, it could potentially head towards the $2,022 resistance zone.
However, it's important to note that there are growing expectations that the Federal Reserve (Fed) will keep things unchanged in December and may not raise interest rates any further, which could limit the upside potential for the USD. This, in turn, might offer some support to gold, which is considered a non-yielding asset. Moreover, the ongoing risk of an escalation in the Israel-Hamas conflict is another factor that may prevent a significant decline in XAU/USD. Therefore, it might be wise to wait for strong sustained selling pressure before considering a substantial correction from the year-to-date peak reached on October 27.
The US Dollar is making a modest recovery from a six-week low it hit on Friday, thanks to a decent increase in US Treasury bond yields. This, in turn, is contributing to the downward pressure on gold. However, the prevailing market sentiment is that the Federal Reserve won't raise rates again, especially given the softer US macroeconomic data released on Friday. For instance, the non-farm payroll (NFP) report showed that the US added 150,000 jobs in October, falling short of the estimated 180,000 and revised down from the originally reported 336,000 for the previous month. The US ISM Non-Manufacturing PMI also dropped to a five-month low of 51.8 in October, reinforcing expectations that the Fed will maintain its current stance at the December policy meeting.
On the geopolitical front, there's ongoing tension in the Israel-Hamas conflict, with Israel rejecting calls for a ceasefire and intensifying military operations against Hamas in Gaza. This situation continues to influence the dynamics of gold prices.
From a technical perspective, any further decline in gold prices may find support around the $1,980 level, followed by the previous week's high near $1,970. If there's a continued downward trend, the price of gold may face additional pressure, potentially dropping towards the $1,964 area, with the next significant support in the $1,954-1,953 range.
Conversely, if gold prices rebound, the $2,000 mark could serve as an immediate resistance level, followed by the Friday swing high around $2,004, and the year-to-date peak near $2,009. If gold manages to break through this resistance, it could potentially head towards the $2,022 resistance zone.
Note
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