Gold price lacks bullish conviction amid a further rise in US bond yields, ahead of Powell


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  • Gold price trades with a positive bias for the third successive day on Thursday.
  • Geopolitical risks continue to underpin demand for the safe-haven XAU/USD.
  • Hawkish Fed expectations, rising US bond yields and stronger USD cap gains.

Gold price (XAU/USD) gained strong positive traction on Wednesday and shot to its highest level since early August, around the $1,962-1,963 area in the wake of the risk of an escalation in the Middle East conflict. That said, a further rise in the US Treasury bond yields, bolstered by expectations that the Federal Reserve (Fed) will keep rates higher for longer, capped gains for the non-yielding yellow metal. Apart from this, a pickup in the US Dollar (USD) demand prompted some profit-taking at higher levels and led to a modest pullback.

The retracement slide, however, lacked follow-through and stalled near the $1,938 region. Geopolitical tensions continue to drive some haven flows, allowing the Gold price to attract some buying for the third successive day on Thursday. The precious metal maintains its bid tone through the first half of the European session, though lacks follow-through. Bulls seem reluctant to place aggressive bets ahead of Fed Chair Jerome Powell's speech. Investors will look for cues about the Fed’s policy outlook, which, in turn, will influence the buck and the XAU/USD.

Daily Digest Market Movers: Gold price struggles to capitalize on modest intraday gains

  • The safe-haven Gold price continues to draw support from concerns that the Israel-Hamas conflict could spill over to the rest of the Middle East region.
  • Egyptian and Palestinian leaders called off a summit with US President Joe Biden after a blast at a Gaza hospital reportedly killed hundreds of Palestinians.
  • The UK Times reported that Israeli PM Netanyahu has won private backing from President Biden to press ahead with a ground invasion of Gaza.
  • Biden said that the US will make sure Israel has what it needs to defend itself and that Hamas has committed atrocities that make ISIS look more rational.
  • The upbeat US Retail Sales figures released on Tuesday suggested that the economy ended the third quarter on a strong note and lifted Q3 GDP estimates.
  • The data also pushed up fears of sticky inflation, which could allow the Federal Reserve to stick to its hawkish stance and keep interest rates higher for longer.
  • This, in turn, leads to a further rise in the US Treasury bond yields and continues to underpin the US Dollar, which is seen capping gains for the XAU/USD.
  • The yield on the benchmark 10-year US government bond climbs to a fresh 16-year peak and moves well within the striking distance of the 5% psychological mark.
  • Investors now look to the US Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index and Existing Home Sales data for short-term impetus.
  • The focus will remain glued to Fed Chair Jerome Powell's scheduled speech, which will be scrutinized closely for cues about the future rate hike path.

Technical Analysis: Gold price retain control after wednesday's break through the 200-day SMA

From a technical perspective, the overnight sustained breakout through the 200-day Simple Moving Average (SMA) and a subsequent strength beyond the $1,947-1,948 supply zone was seen as a fresh trigger for bulls. Moreover, oscillators on the daily chart are holding in the positive territory and are still far from being in the overbought zone. This, in turn, suggests that the path of least resistance for the Gold price is to the upside. That said, it will still be prudent to wait for some follow-through buying beyond the overnight swing high, around the $1,962-1,963 region, before positioning for any further gains. The XAU/USD might then accelerate the momentum towards the $1,982 intermediate hurdle and then aim to reclaim the $2,000 psychological mark for the first time since May.

On the flip side, weakness below the $1,948-1,947 area is likely to find decent support near the 200-day SMA, currently around the $1,930 region. This is closely followed by the 100-day SMA, around the $1,922 area ahead of the $1,930 support zone, below which the Gold price could slide back to challenge the $1,900 round figure. The latter coincides with the 50-day SMA and should act as a strong base for the XAU/USD. A convincing break below will negate the positive outlook and shift the near-term bias in favour of bearish traders.

US Dollar price in the last 7 days

The table below shows the percentage change of US Dollar (USD) against listed major currencies in the last 7 days. US Dollar was the strongest against the New Zealand Dollar.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   0.86% 1.58% 1.02% 1.81% 0.51% 3.21% -0.23%
EUR -0.86%   0.73% 0.17% 0.96% -0.34% 2.38% -1.09%
GBP -1.60% -0.74%   -0.57% 0.23% -1.08% 1.66% -1.85%
CAD -1.02% -0.17% 0.57%   0.80% -0.51% 2.22% -1.27%
AUD -1.84% -0.98% -0.24% -0.81%   -1.31% 1.44% -2.08%
JPY -0.52% 0.32% 1.06% 0.50% 1.29%   2.68% -0.75%
NZD -3.32% -2.42% -1.69% -2.27% -1.46% -2.78%   -3.54%
CHF 0.22% 1.09% 1.80% 1.24% 2.03% 0.74% 3.44%  

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).

Economic Indicator

United States Initial Jobless Claims

The Initial Jobless Claims released by the US Department of Labor is a measure of the number of people filing first-time claims for state unemployment insurance. In other words, it provides a measure of strength in the labor market. A larger than expected number indicates weakness in this market which influences the strength and direction of the US economy. Generally speaking, a decreasing number should be taken as positive or bullish for the USD.

Read more.

Next release: 10/19/2023 12:30:00 GMT

Frequency: Weekly

Source: US Department of Labor

Why it matters to traders

Every Thursday, the US Department of Labor publishes the number of previous week’s initial claims for unemployment benefits in the US. Since this reading could be highly volatile, investors may pay closer attention to the four-week average. A downtrend is seen as a sign of an improving labour market and could have a positive impact on the USD’s performance against its rivals and vice versa.

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