Gold price struggles amid strong US Dollar and reduced Fed rate cut expectations
- Gold price remains under pressure due to sustained US Dollar strength
- Diminishing odds for a 50 bps Fed rate cut in November lift the USD to a multi-week high
- Geopolitical risks act as a supporting factor for Gold ahead of US data releases
During the Asian session on Thursday, the Gold price (XAU/USD) is facing challenges as the US Dollar continues to strengthen, drawing support from reduced expectations for a more aggressive policy easing by the Federal Reserve (Fed). The positive US ADP report released on Wednesday indicated stability in the labor market, leading investors to scale back their bets on a significant Fed rate cut in November. This has propelled the USD Index (DXY) to a three-week high, dampening demand for the non-yielding yellow metal.
Despite the downward pressure on Gold, the escalating conflicts in the Middle East are providing some support. Iran’s ballistic missile launch at Israel on Tuesday, followed by Israel’s air strike in Lebanon on Thursday, raise concerns about a potential full-blown war in the region. This geopolitical tension could act as a tailwind for Gold, balancing out the negative impact of the strong US Dollar. Traders are also cautious ahead of the release of the US Nonfarm Payrolls (NFP) report on Friday, which is closely monitored for its impact on the market.
Daily Digest Market Movers: US Dollar strength and geopolitical risks influence Gold price
- Strong US labor market reports and hawkish comments from Fed Chair Jerome Powell support the USD recovery
- Surprise increase in US JOLTS Job Openings and higher-than-expected ADP job additions boost confidence in the labor market
- Expectations of China’s economic recovery and potential US rate cuts weigh on Gold price
- Geopolitical tensions in the Middle East contribute to uncertainty and support safe-haven assets like Gold
Technical Outlook: Gold price favors bulls with key resistance and support levels
From a technical standpoint, Gold’s price action shows consolidation after a recent rally, indicating a bullish trend. Oscillators on the daily chart support this outlook, favoring upward movement. Immediate resistance levels are at $2,672-$2,673 and $2,685-$2,686, with the potential to reach the previous all-time high. On the downside, support at $2,625-$2,624 is crucial, followed by $2,560 and $2,535-$2,530 levels.
Gold FAQs
- Gold is a safe-haven asset, commonly used to hedge against inflation and currency depreciation
- Central banks hold significant Gold reserves to strengthen their currency and economy during turbulent times
- Gold price has an inverse correlation with the US Dollar and risk assets, making it a popular diversification tool
- Factors influencing Gold price include geopolitical instability, interest rates, and the USD’s performance
Analysis:
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