Gold Price Update: Factors Affecting XAU/USD Movement
- Gold price ticks lower, though it lacks follow-through and remains close to the record high.
- Bets for smaller Fed rate cuts, elevated US bond yields and the USD weigh on the XAU/USD.
- Geopolitical risks, US political uncertainty, and easing monetary policy regime offer support.
Gold price (XAU/USD) is experiencing a slight decrease during the Asian session on Wednesday, but it remains near the record peak reached the previous day. Several factors are influencing this movement:
1. Impact of Fed Rate Cuts and US Bond Yields
The US Dollar (USD) has risen to its highest level since early August due to expectations of smaller interest rate cuts by the Federal Reserve (Fed). This has led to an increase in US Treasury bond yields, putting pressure on the XAU/USD. The recent upswing in bond yields to a three-month high has prompted some profit-taking in gold, given slightly overbought conditions on the daily chart.
2. Geopolitical Risks and US Political Uncertainty
Despite the decline in gold price, geopolitical risks from conflicts in the Middle East and US political uncertainty are providing support. The ongoing risk-off environment and expected interest rate cuts by major central banks are also factors that could limit the downside for XAU/USD.
Daily Digest Market Movers: Gold Price Trends
- Traders are anticipating a 25 basis point rate cut by the Fed in November, leading to a rally in the US Dollar.
- The possibility of former President Donald Trump winning the upcoming US Presidential election is fueling speculations of inflation-generating tariffs.
- Hezbollah’s recent attacks in the Middle East and US-Iran tensions are contributing to market uncertainty.
Technical Outlook: Gold Price Analysis
From a technical standpoint, the XAU/USD is facing resistance near the $2,750 area. Breaking through this barrier could pave the way for further upside towards the $2,800 mark. On the downside, support is likely to be found near $2,725, with a break below leading to potential further declines towards $2,700 and $2,680-2,675 support levels.
Gold FAQs: Key Information
Here are some frequently asked questions about gold:
- Gold is considered a safe-haven asset, a hedge against inflation, and has historically been used as a store of value.
- Central banks hold significant amounts of gold to support their currencies and improve their perceived strength.
- Gold has inverse correlations with the US Dollar, US Treasuries, and risk assets, making it an attractive diversification option.
- Factors such as geopolitical instability, interest rates, and the strength of the US Dollar can impact the price of gold.