Gold price pulls back from all-time peak amid reviving USD demand, downside seems limited
- Gold price eases from record high amid an uptick in the US bond yields and the USD.
- Dovish Fed expectations, geopolitical risks and the US political uncertainty to limit losses.
- Traders look to Fedspeaks for some impetus ahead of the US PCE Price Index on Friday.
Gold price (XAU/USD) retreats after touching a fresh all-time peak, around the $2,640 area on Tuesday and slides to the lower end of its daily range heading into the European session. An uptick in the US Treasury bond yields helps revive the US Dollar (USD) demand, which, in turn, prompts some profit-taking around the commodity amid slightly overbought conditions on the daily chart.
Any meaningful corrective decline for the Gold price, however, seems limited in the wake of rising bets for more aggressive policy easing by the Federal Reserve (Fed). Apart from this, persistent geopolitical risks, the US political uncertainty and a bleak global economic outlook should underpin the safe-haven XAU/USD as traders look to Fed Governor Michelle Bowman's speech for a fresh impetus.
Daily Digest Market Movers: Gold price bulls turn cautious amid a pickup in the USD demand
- Bets that the Federal Reserve will further lower borrowing costs by 125 basis points in 2024 after last week's jumbo 50 bps rate cut pushed the non-yielding Gold price to a fresh record high on Monday.
- According to the CME Group's FedWatch Tool, investors are now pricing in another oversized rate cut at the November policy meeting, which caps a modest US Dollar recovery from the YTD low.
- Minneapolis Fed President Neel Kashkari noted on Monday that the balance of risks had shifted away from high inflation to a further weakening of the labor market, warranting a lower interest rate.
- Adding to this, Atlanta Fed President Raphael Bostic said that the recent data show convincingly that the US is on a sustainable path to price stability and that risks to the labour market have increased.
- Chicago Fed President Austan Goolsbee said that the labor market deterioration typically happens quickly and that keeping rates high does not make sense when you want things to stay where they are.
- On the data front, a survey compiled by S&P Global showed that business activity in the Eurozone unexpectedly contracted sharply, while business activity in the US was steady in September.
- Additional details of the flash US PMI showed that average prices charged for goods and services rose at the fastest pace in six months, pointing to an acceleration in inflation in the coming months.
- This comes on top of the hypothesis that rate cuts implemented to stimulate the economy occasionally lead to rising prices and could benefit the commodity's status as a hedge against inflation.
- Israeli airstrikes on Monday against what it said are Hezbollah weapons sites in southern and eastern Lebanon killed nearly 500 people, raising the risk of a wider conflict in the Middle East.
- This, along with the US political uncertainty and a bleak global economic outlook, suggests that the path of least resistance for the safe-haven precious metal remains to the upside.
- That said, a surprise rate cut by the People's Bank of China (PBOC) on Monday, along with a stopgap spending bill to fund the US government through December 20, cap gains for the XAU/USD.
- Traders might also opt to move to the sidelines ahead of the release of the US Personal Consumption Expenditures (PCE) Price Index on Friday amid overbought conditions on the daily chart.
Technical Outlook: Gold price dips towards the $2,600 mark could be seen as a buying opportunity
From a technical perspective, the recent breakout and acceptance above the $2,600 mark could be seen as a fresh trigger for bullish traders. That said, the Relatively Strength Index (RSI) on the daily chart is holding above the 70 mark and warrants some caution. Hence, it will be prudent to wait for some near-term consolidation or a modest pullback before positioning for the next leg of a move-up.
Meanwhile, any corrective slide is likely to attract fresh buyers near the $2,600 mark, below which the Gold price could drop to the $2,560 horizontal zone. The next relevant support is pegged near the $2,535-2,530 resistance breakpoint ahead of the $2,500 psychological mark. A convincing break below the latter might shift the near-term bias in favor of bearish trades and pave the way for some meaningful downside.
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.03% | -0.09% | 0.53% | -0.16% | 0.07% | -0.05% | 0.12% | |
| EUR | 0.03% | -0.05% | 0.58% | -0.17% | 0.11% | -0.03% | 0.15% | |
| GBP | 0.09% | 0.05% | 0.64% | -0.08% | 0.17% | 0.02% | 0.21% | |
| JPY | -0.53% | -0.58% | -0.64% | -0.69% | -0.48% | -0.63% | -0.42% | |
| CAD | 0.16% | 0.17% | 0.08% | 0.69% | 0.24% | 0.11% | 0.30% | |
| AUD | -0.07% | -0.11% | -0.17% | 0.48% | -0.24% | -0.12% | 0.06% | |
| NZD | 0.05% | 0.03% | -0.02% | 0.63% | -0.11% | 0.12% | 0.20% | |
| CHF | -0.12% | -0.15% | -0.21% | 0.42% | -0.30% | -0.06% | -0.20% |
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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
