Gold price edges lower amid receding safe-haven demand, downside seems limited
- Gold price remains under some selling pressure for the second successive day on Tuesday.
- A positive risk tone, along with elevated US bond yields, continues to weigh on the metal.
- Geopolitical risk and the uncertainty over the Fed’s rate-hike path should help limit losses.
Gold price (XAU/USD) struggles to capitalize on the previous day's late rebound from the $1,908 area and meets with a fresh supply during the Asian session on Tuesday. This marks the second successive day of a negative move for the precious metal and is sponsored by a positive risk tone, which tends to undermine traditional safe-haven assets. Apart from this, elevated US Treasury bond yields, bolstered by expectations for further policy tightening by the Federal Reserve (Fed), turn out to be another factor weighing on the non-yielding yellow metal.
That said, the raging Israel-Hamas conflict might continue to benefit the Gold price. This, along with growing acceptance that the Federal Reserve (Fed) will keep interest rates unchanged for the second straight time in November, should lend some support to the XAU/USD. Dovish Fed expectations, meanwhile, keep the US Dollar (USD) bulls on the defensive and should further help limit losses for the US Dollar-denominated commodity. Traders might also prefer to wait on the sidelines ahead of Fed Chair Jerome Powell's scheduled speech on Thursday.
Powell's comments will be scrutinized closely for cues about the future interest rate decisions, which, in turn, will play a key role in determining the next leg of a directional move for the Gold price. In the meantime, the recent failure near a technically significant 200-day Simple Moving Average (SMA) warrants caution before positioning for the resumption of a strong recovery move from the $1,810 region, or a multi-month low touched on October 6.
Daily Digest Market Movers: Gold price remains under some selling pressure for the second straight day
- Gold price might continue to attract some haven flows in the wake of the ongoing conflict between Israel and Hamas, which might broaden into a wider proxy war with Iran.
- The Israel Defence Forces chief said the army will soon enter the Gaza Strip to decimate the Hamas terror group.
- Israel had urged Palestinians to evacuate to the southern area of the Gaza City enclave ahead of an expected large-scale ground assault against the terror attacks,
- The US military ordered a second carrier strike group to the Eastern Mediterranean as part of its efforts to deter Iran and its proxies from expanding the conflict.
- Iran has repeatedly warned that a ground invasion of the long-blockaded Gaza would be met with a response from other fronts.
- "The possibility of pre-emptive action by the resistance axis is expected in the coming hours," Iran's foreign minister, Hossein Amir-Abdollahian said on Monday.
- Philadelphia Fed President Patrick Harker stated on Monday that the central bank should hold rates steady in the absence of some turn in the data.
- The US consumer inflation figures released last week, however, kept the door open for one more Fed rate hike move by the year-end.
- The prospects for further policy tightening by the Fed remain supportive of elevated US bond yields and continue to act as a tailwind for the US Dollar.
- Traders now look to the US Retail Sales data for some impetus, though the focus will remain glued to Fed Chair Jerome Powell's scheduled speech on Thursday.
- The US Retail Sales possibly grew by 0.3% in September, while sales excluding automobiles are expected to register a modest rise of 0.2% during the reported month.
Technical Analysis: Gold price manages to hold above 100-day SMA support near the $1,900 round-figure mark
From a technical perspective, any subsequent decline is likely to attract fresh buyers and remain limited near the $1,900 round-figure mark, which coincides with the 100-day SMA. This, in turn, should act as a key pivotal point, which if broken will make the Gold price vulnerable to slide further towards the next relevant support near the $1,868 horizontal zone en route to the $1,860-1,855 region.
On the flip side, the 200-day SMA, nearing Friday’s swing high, around the $1,932-1,933 zone, might continue to act as an immediate strong barrier. Some follow-through buying will be seen as a fresh trigger for bulls and lift the Gold price towards the $1,945-1,947 supply zone. A sustained strength beyond the latter will set the stage for a further appreciating move towards the $1,970 region.
US Dollar price this week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF |
| USD | -0.27% | -0.39% | -0.14% | -0.70% | -0.03% | 0.06% | -0.19% |
| EUR | 0.27% | -0.12% | 0.13% | -0.48% | 0.24% | 0.34% | 0.06% |
| GBP | 0.38% | 0.11% | 0.22% | -0.32% | 0.34% | 0.44% | 0.19% |
| CAD | 0.14% | -0.13% | -0.22% | -0.55% | 0.11% | 0.20% | -0.05% |
| AUD | 0.72% | 0.44% | 0.33% | 0.57% | 0.67% | 0.77% | 0.49% |
| JPY | 0.04% | -0.21% | -0.35% | -0.14% | -0.71% | 0.09% | -0.16% |
| NZD | -0.06% | -0.30% | -0.45% | -0.20% | -0.75% | -0.09% | -0.28% |
| CHF | 0.20% | -0.06% | -0.20% | 0.05% | -0.48% | 0.17% | 0.26% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Gold FAQs
Why do people invest in Gold?
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Who buys the most Gold?
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
How is Gold correlated with other assets?
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling 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 Gold price, while sell-offs in riskier markets tend to favor the precious metal.
What does the price of Gold depend on?
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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