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Gold price stands firm near record high despite elevated US bond yields, stronger USD

  • Gold price attracts some dip-buying on Wednesday and hits a fresh record peak in the last hour.
  • Middle East tensions, US political uncertainty and easing monetary policy regime lend support.
  • Bets for smaller Fed rate cuts, elevated US bond yields and bullish USD might cap the XAU/USD. 

Gold price (XAU/USD) continues scaling new record highs on Wednesday and climbs further beyond the $2,750 level during the first half of the European session. The prevalent risk-off mood, along with the risk of a further escalation of tensions in the Middle East and a full-blown regional war, continues to drive haven flows towards the precious metal. Apart from this, the US political uncertainty and easing monetary policy environment turn out to be other factors benefiting the non-yielding yellow metal.

Bulls, meanwhile, seem rather unaffected by the ongoing US Dollar (USD) rally to its highest level since early August, which tends to undermine demand for the Gold price. Meanwhile, bets for smaller interest rate cuts by the Federal Reserve (Fed), along with deficit-spending concerns after the November 5 US Presidential election, push the US Treasury bond yields to their highest level in three months. This might keep a lid on any further gains for the XAU/USD amid slightly overbought conditions on the daily chart. 

Daily Digest Market Movers: Gold price bulls not ready to give up yet despite broad-based USD strength

  • The US Dollar rally remains uninterrupted amid firming expectations for a less aggressive policy easing by the Federal Reserve and exerts some downward pressure on the Gold price on Wednesday.
  • According to CME Group's FedWatch Tool, traders pricing in a nearly 90% chance that the US central bank will lower borrowing costs by 25 basis points at the next monetary policy meeting in November.
  • Moreover, rising odds of former President Donald Trump winning the November 5 US Presidential election next month fuel speculations about the launch of potentially inflation-generating tariffs.
  • This leads to an extended selloff in the US bond market and pushes the yields to a multi-month peak, underpinning the buck and contributing to driving flows away from the non-yielding yellow metal.
  • The yield on the benchmark 10-year US government bond hovered near 4.2% after topping that level on Tuesday for the first time since July amid renewed concerns about a resurgence in inflation.
  • Hezbollah fired rockets at two bases near Tel Aviv and a naval base west of Haifa as the market await the impending Israeli strike against Iran in retaliation to the latter's ballistic missile attack on October 1.
  • Meanwhile, diplomatic efforts, so far, have failed to bring an end to the year-long conflict in the Middle East, which weighs on investors' sentiment and should offer support to the safe-haven XAU/USD.
  • Traders now look forward to the release of the US Existing Home Sales data for short-term impetus ahead of a scheduled speech by Richmond Fed President Thomas Barkin later during the US session.

Technical Outlook: Gold price approaches ascending channel resistance near $2,765 amid overbought RSI

From a technical perspective, the XAU/USD faced rejection near the $2,750 area, which is followed by the top boundary of a two-week-old ascending channel, around the $2,767 region. The said barrier should act as a key pivotal point, which if cleared decisively should pave the way for an extension of the recent well-established uptrend. The subsequent move up might then lift the Gold price to the $2,800 round-figure mark.

On the flip side, any subsequent slide is likely to find decent support near the $2,725 area, representing the lower end of the aforementioned trend channel. A convincing break below the latter might prompt some technical selling and drag the Gold price to the $2,700 mark en route to the $2,680-2,675 support. The latter is near the 100-period Simple Moving Average (SMA) on the 4-hour charts and should act as a strong base.

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.

 USDEURGBPJPYCADAUDNZDCHF
USD 0.10%-0.01%0.90%0.05%0.30%0.21%0.11%
EUR-0.10% -0.10%0.79%-0.03%0.22%0.12%0.02%
GBP0.01%0.10% 0.89%0.04%0.33%0.22%0.17%
JPY-0.90%-0.79%-0.89% -0.85%-0.60%-0.69%-0.74%
CAD-0.05%0.03%-0.04%0.85% 0.26%0.18%0.12%
AUD-0.30%-0.22%-0.33%0.60%-0.26% -0.07%-0.14%
NZD-0.21%-0.12%-0.22%0.69%-0.18%0.07% -0.07%
CHF-0.11%-0.02%-0.17%0.74%-0.12%0.14%0.07% 

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).

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Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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