On Friday, gold price (XAU/USD) soared to a three-week high, around $1,933 in the aftermath of the escalating Israel-Hamas conflict, which drove investors to seek sanctuary in conventional safe-haven assets. In addition, anticipation that the Federal Reserve is nearing the conclusion of its rate-hiking cycle boosted the non-yielding yellow metal.
On the other hand, bulls struggled to capitalize on the momentum beyond the 200-day Simple Moving Average (SMA). This, combined with rising US Treasury bond yields, drives some profit-taking in the gold market on the opening day of a new week. The XAU/USD continues its steady decline during the European session, but it manages to stay above the $1,900 barrier despite a weak US Dollar (USD) price action. A weaker US dollar benefits US Dollar-denominated commodity, particularly the XAU/USD.
Traders appear hesitant as well, preferring to wait for new clues about the Fed’s future rate-hike path, as well as major macro disclosures from China, the world’s second-largest economy, before preparing for the next leg of a directional move for the gold price. Meanwhile, the release of the Empire State Manufacturing Index from the U.S. on Monday, as well as Fed speaks and US bond yields, may influence USD price dynamics. Aside from that, the overall risk mood should support the safe-haven gold.
A recent view on the precious yellow metal is that on Friday, the gold price rose about 3.5% and gained more than 5.2% for the week, the biggest since March. While the intensification of fighting between Hamas and Israeli military has boosted the safe-haven XAU/USD. The Israeli military’s departure deadline for residents of northern Gaza has already passed. The Israel Defence Force (IDF) has stated that it is ready to launch a coordinated attack including air, ground, and marine forces. Meanwhile, following fire exchanges with the Iran-backed Hezbollah militia, Israel now confronts the threat of a new confrontation on its northern border with Lebanon.
In October, consumer morale in the U.S. deteriorates, reinforcing expectations that the Fed will maintain interest rates steady for the second consecutive month in November. Americans’ estimates for overall inflation over the next year increased from 3.2% in September to 3.8% in October, the highest level since April. Expectations for inflation over the next five years increased to 3% in October from 2.8% in September, leaving the door open for another Fed rate hike by the end of the year. US bond rates remain elevated amid expectations that the Fed is still a long way from concluding its policy-tightening cycle, which acts as a tailwind for the USD.
Technically, any future slide is more likely to find solid support near the $1,900 round-figure level. The aforementioned handle aligns with the 100-day SMA and should now serve as a critical decisive point. A convincing break below might expose the gold price to the next relevant support near the $1,868 horizontal zone before falling to the $1,860-1,855 range.
Bulls, on the other hand, may now wait for some follow-through purchasing beyond Friday’s swing high, around $1,932-1,933, before putting further bets. The gold price might then accelerate toward the $1,945-1,947 heavy supply zone. A prolonged strength above the latter will be viewed as a new trigger for bulls, paving the door for a further upward surge.
Please note that this article does not offer any instructions or suggestions regarding investment decisions. It is important for you to conduct your own research or seek professional advice from a qualified professional before conducting an investment decision.