Gold Price Consolidates After Reaching All-Time High
- Gold price pauses after the recent strong move up to a fresh all-time peak touched on Monday.
- The fundamental backdrop favors bullish trades and supports prospects for additional gains.
- Traders now look forward to the US PCE Price Index on Friday before placing directional bets.
Gold price (XAU/USD) extends its consolidative price move for the second straight day on Tuesday as bulls turn cautious after the recent rise to a fresh all-time peak touched the previous day amid slightly overbought conditions on the daily chart. The downside remains cushioned in the wake of bets for more aggressive easing by the US Federal Reserve (Fed), which caps the US Dollar (USD) recovery from the YTD peak touched in reaction to a jumbo rate cut last week.
Daily Digest Market Movers: Gold price remains supported by further Fed rate cut bets, geopolitical risks
- Bets that the Federal Reserve will further lower borrowing costs by 125 basis points in 2024 after last week’s jumbo 50 bps rate cut pushed the non-yielding Gold price to a fresh record high on Monday.
- Investors are now pricing in another oversized rate cut at the November policy meeting, which caps a modest US Dollar recovery from the YTD low.
- Geopolitical risks, US political uncertainty, and economic worries underpin the safe-haven Gold price.
- Recent data shows a shift in the balance of risks towards a weakening labor market, warranting lower interest rates.
- Business activity in the Eurozone unexpectedly contracted sharply, while the US remained steady in September.
- Flash US PMI data showed a rise in prices charged, pointing to potential inflation acceleration.
- Gold price benefits as a hedge against inflation and geopolitical uncertainties.
Technical Outlook: Gold price needs to consolidate before advancing the recent upward trend
From a technical perspective, the recent breakout and acceptance above the $2,600 mark could be seen as a fresh trigger for bullish traders. RSI on the daily chart warrants caution, suggesting a need for consolidation or a modest pullback before the next move-up.
Support levels near $2,600, $2,560, and $2,535-2,530, with $2,500 as a crucial psychological mark.
Gold FAQs
- Gold is a safe-haven asset, acting as a hedge against inflation and currency depreciation.
- Central banks hold significant Gold reserves to strengthen their economies and currencies during turbulent times.
- Gold has an inverse correlation with the US Dollar, US Treasuries, and risk assets.
- Price movements depend on factors like geopolitical instability, interest rates, and the strength of the US Dollar.