Gold may experience a short-term, slight rebound due to the escalation of the Israel-Palestine conflict, reversing its recent downward trend. Key resistance levels are at $1875 and $1905, while support levels are seen at $1818 and $1806. Positive data releases such as the ISM Manufacturing and Non-Farm Payrolls (NFP) could put pressure on gold. Furthermore, looking at CFTC positioning data and technical analysis, the medium to long-term downtrend in gold remains unchanged, with the short-term potential for a modest upward move.
Market Review
During the week of October 2nd to 8th, precious metals had mixed performances, with gold posting a minor increase of 0.81% and silver gaining 2.8%. Influenced by events such as better-than-expected ISM Manufacturing PMI and Non-Farm Payrolls data, gold initially declined before rebounding. It briefly dropped to $1810 and ended the week at $1832.29.
Source: MacroMicro, 10/02-08 major precious metal futures price changes
ISM Manufacturing PMI and NFP Beat Expectations, Increasing Rate Hike Speculations for the Year
On Monday, October 2nd, the United States released the September ISM Manufacturing PMI, recording its highest level since November of the previous year. The data showed that the US manufacturing index for September was 49.0, surpassing market expectations of 47.7 and the previous value of 47.6. Although the reading remained below the 50 threshold, indicating contraction, it exceeded the predictions of most economists, marking a new high since November of the previous year. This positive performance was attributed to the strongest production growth and factory employment expansion since July of the previous year, while the new orders index, though still in contraction, reached a new high in over a year. Furthermore, the subsequent release of the ISM Services PMI recorded 53.6, matching expectations but slightly lower than the previous value of 54.8.
Following that, the Non-Farm Payrolls report also delivered better-than-expected results. On Friday, October 6th, data from the US Labor Department showed that September's non-farm employment increased by 336,000, surpassing expectations of 170,000. The August figure was revised from 187,000 to 187,000. It was more than twice what economists had predicted, while the unemployment rate remained steady at 3.8%. This data undoubtedly increased pressure on Fed policymakers regarding monetary policy decisions.
Mitrade Analyst
The significant beat in September's ISM Manufacturing and Non-Farm Payrolls data has raised market expectations for a rate hike before the end of the year. Higher interest rates are likely to provide support for the US dollar and put downward pressure on gold. While a short-term rebound in gold seemed unlikely initially, the escalation of the Israel-Palestine conflict driven by safe-haven demand could lead to a recent increase in gold prices. However, if this conflict persists for an extended period and the event is fully priced in by the market, gold may continue to decline.
Escalation of Israel-Palestine Conflict May Trigger a Short-Term Rebound in Gold
On October 7th, the Israel-Palestine conflict erupted, potentially causing a short-term rebound in gold. The Palestinian group Hamas declared a military operation against Israel, launching thousands of rockets into Israeli territory and holding civilians and soldiers hostage. In response, Israeli Prime Minister Netanyahu announced that Israel was in a state of war and mobilized reserve forces for a counterattack. With international commodity markets closed, gold opened 15 dollars higher on Monday due to increased safe-haven demand.
In terms of CFTC positioning, recent data shows a decrease in speculative long positions and a significant increase in short positions for gold. According to updated CFTC data from September 27th to October 3rd, speculative long positions decreased by 24,589 to 91,226, while open interest for gold futures decreased by 7,154 to 228,406 for speculative long positions and increased by 17,435 for short positions. This indicates that short-term market investors are bearish on gold's future.
Mitrade Analyst
Considering the reduction in long positions and the increase in short positions in the speculative market, investors are bearish on gold's future. However, due to the impact of the Israel-Palestine conflict and increased safe-haven demand, gold may experience a short-term, slight rebound this week. Nonetheless, the medium to long-term downward trend in gold is unlikely to change.
Technical Analysis
From a technical standpoint, the 60-day MA shows a downward trend. The 14-day RSI value of 38 is below 60. On the daily MACD chart, the short-term line is moving upward, potentially crossing the long-term line. The histogram is relatively high but remains below the zero line, indicating a short-term or wide-ranging consolidation for gold.
Resistance levels: 1875, 1905
Support levels: 1818, 1806
Source: Investing.com
Mitrade Analyst
Considering the analysis of various indicators, the medium to long-term downward trend in gold remains unchanged, while short-term fluctuations are expected. Investors should also pay attention to news and economic data that may provide guidance for gold's future direction this week, such as the US Producer Price Index (PPI) month-over-month, core inflation rate, and Consumer Price Index (CPI) annual rate for September.
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