Gold price holds steady near all-time peak, below $2,800 ahead of US PCE Price Index
- Gold price continues to attract haven flows amid US political jitters and Middle East woes.
- A further rise in the US bond yields revives the USD demand and caps the precious metal.
- Traders now look to the release of the US PCE Price Index for some meaningful impetus.
Gold price (XAU/USD) is seen oscillating in a narrow range during the Asian session on Thursday and consolidating its recent strong gains to a record high. The US Dollar (USD) attracts some dip-buying and for now, seems to have stalled its corrective slide from a three-month top amid bets for a slower path of rate cuts by the Federal Reserve (Fed), bolstered by robust economic data. This, along with concerns about the increasing US fiscal deficit, continues to push the US Treasury bond yields higher and caps the upside for the non-yielding yellow metal on the back of slightly overbought conditions on the daily chart.
Traders also seem reluctant to place fresh bullish bets around the Gold price and opt to wait for the release of the US Personal Consumption Expenditure (PCE) Price Index. Apart from this, the closely watched US Nonfarm Payrolls (NFP) report on Friday will be looked upon for cues about the Fed's interest rate outlook, which, in turn, will drive demand for the precious metal. In the meantime, any meaningful corrective pullback for the XAU/USD seems elusive in the wake of persistent safe-haven demand stemming from the US political uncertainty ahead of the November 5 presidential election and Middle East tensions.
Daily Digest Market Movers: Gold price remains supported by the US political uncertainty and geopolitical risks
- The Automatic Data Processing (ADP) reported on Wednesday that private sector employers added 233K new jobs in October as compared to the previous month's upwardly revised reading of 159K and better-than-expected consensus estimates.
- The data points to a resilient labor market, which, along with a series of upbeat US data released recently, suggested that the economy remains on strong footing and supports prospects for a less aggressive easing by the Federal Reserve.
- Separately, the US Bureau of Economic Analysis' initial estimate suggested that the world's largest economy expanded by a 2.8% annualized pace during the third quarter, slower than the 3% growth recorded during the April-June period.
- The markets are still pricing in a regular 25 basis points interest rate cut by the Fed in November, which, along with deficit-spending concerns after the US election, continues to push the US Treasury bond yields higher on Thursday.
- The yield on the benchmark 10-year US government bond hovers just below 4.3%, near its highest level since July, which helps revive the US Dollar demand and acts as a headwind for the Gold price amid slightly overbought conditions.
- Thursday's release of the US Personal Consumption Expenditure (PCE) Price Index might influence the Fed's rate-cut path and drive the USD demand, which, in turn, should provide some meaningful impetus to the commodity.
- The uncertainty ahead of next week's US presidential election and escalating geopolitical tensions in the Middle East suggest that the path of least resistance for the safe-haven precious metal remains to the upside.
Technical Outlook: Gold price bulls could pause for a breather near ascending channel resistance, around $2,800
From a technical perspective, the recent move up along an upward-sloping channel from the August monthly swing low points to a well-established short-term bullish trend. That said, the Relative Strength Index (RSI) on the daily chart is already flashing overbought conditions. Hence, any subsequent move up is more likely to remain capped near the $2,800 mark. The said handle represents the top boundary of the channel, which if broken decisively will be seen as a fresh trigger for bulls and set the stage for an extension of the appreciating move.
On the flip side, any meaningful corrective decline now seems to find decent support near the $2,750-2,748 region or a trading range resistance breakpoint. 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.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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