Gold price pulls back from all-time peak, $2,800 remains in sight ahead of US macro data

Gold price continues scaling new all-time peaks amid US election jitters, Middle East woes.
The momentum seems unaffected by elevated US Treasury bond yields and a bullish USD.
Traders now look forward to important US macro data before positioning for further gains.

Haresh Menghani FXStreet

Gold price (XAU/USD) retreats after touching a fresh record high during the early part of the European session on Wednesday and currently trades around the $2,780 region, still up 0.25% for the day. Safe-haven demand stemming from the risk of a further escalation of geopolitical tensions and the uncertainty surrounding the US presidential election turn out to be key factors that continue to benefit the precious metal.

Furthermore, retreating US Treasury bond yields keep the US Dollar (USD) bulls on the defensive below a three-month high set on Tuesday and lend additional support to the Gold price. That said, growing acceptance that the Federal Reserve (Fed) will proceed with smaller interest rate cuts amid a still resilient economy holds back bulls from placing fresh bets around the non-yielding yellow metal amid slightly overbought conditions.

Traders also seem reluctant and opt to wait for important US macro releases, which should provide fresh cues about the Fed's interest rate outlook and in turn, provide some meaningful impetus to the Gold price. Nevertheless, the fundamental backdrop seems tilted in favor of the XAU/USD bulls, suggesting that any meaningful corrective decline might still be seen as a buying opportunity and is more likely to remain limited.

Daily Digest Market Movers: Gold price uptrend remains uninterrupted ahead of US macro data

Republican former US President Donald Trump and Democratic Vice President Kamala Harris are caught in a tight race for the White House, fueling political uncertainty and pushing the Gold price to a fresh record high on Wednesday.
An Israeli strike on a residential building in northern Gaza killed nearly 100 people on Tuesday. This comes days after the Israeli military confirmed on Sunday that the air force had conducted a precise strike targeting Hamas fighters.
The development raises the risk of a further escalation of tensions in the Middle East and contributes to the bid tone surrounding the safe-haven XAU/USD, offsetting the recent surge in the US Treasury bond yields and the US Dollar.
The incoming US macro data suggested that the US economy remains on a strong footing, reaffirming market expectations for a less aggressive policy easing by the Federal Reserve and the prospects for smaller interest rate cuts.
The Conference Board reported on Tuesday the US Consumer Confidence Index registered its largest single-month gain since March 2021 and rose to a nine-month high of 108.7 in October, from September's upwardly revised 99.2.
This reflected optimism in business conditions and the job market, overshadowing the disappointing Job Openings and Labor Turnover Survey, or JOLTS report, which showed that vacancies fell to more than a 3-1/2-year low in September.
Apart from this, deficit-spending concerns after the November 5 US presidential election keep the US bond yields elevated near a multi-month top, which, however, do little to hinder the precious metal's follow-through positive move.
Traders now look to Wednesday's US economic docket, featuring the release of the ADP report on private-sector employment and the Advance GDP print, which is expected to show that the economy grew by a 3% annualized pace in Q3.
The market attention will then shift to the US Personal Consumption Expenditure (PCE) Price Index – the Fed's preferred inflation gauge – on Thursday and the closely-watched US Nonfarm Payrolls (NFP) report on Friday.

Technical Outlook: Gold price slightly overbought RSI on the daily chart warrants caution for bulls

From a technical perspective, the overnight breakout above a one-week-old trading range was seen as a fresh trigger for bulls. The subsequent move up lifts the Gold price to an ascending trend-line resistance extending from early July, currently pegged near the $2,780-2,785 region, which could now act as a strong barrier amid a slightly overbought Relative Strength Index (RSI) on the daily chart. A sustained strength beyond the said barrier, however, could lift the XAU/USD further towards the $2,800 mark.

On the flip side, any meaningful corrective slide now seems to find decent support near the trading range hurdle breakpoint, around the $2,750 region. Some follow-through selling could make the Gold price vulnerable to extend the fall further towards the $2,732-2,730 intermediate support en route to the $2,715 area. This is followed by the $2,700 mark, which if broken should pave the way for a decline towards the next relevant support near the $2,675 zone en route to the $2,657-2,655 region.

Economic Indicator

ADP Employment Change

The ADP Employment Change is a gauge of employment in the private sector released by the largest payroll processor in the US, Automatic Data Processing Inc. It measures the change in the number of people privately employed in the US. Generally speaking, a rise in the indicator has positive implications for consumer spending and is stimulative of economic growth. So a high reading is traditionally seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

Why it matters to traders?

Traders often consider employment figures from ADP, America’s largest payrolls provider, report as the harbinger of the Bureau of Labor Statistics release on Nonfarm Payrolls (usually published two days later), because of the correlation between the two. The overlaying of both series is quite high, but on individual months, the discrepancy can be substantial. Another reason FX traders follow this report is the same as with the NFP – a persistent vigorous growth in employment figures increases inflationary pressures, and with it, the likelihood that the Fed will raise interest rates. Actual figures beating consensus tend to be USD bullish.

Author

Haresh Menghani

FXStreet

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

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