Gold price hovers near the daily low around $2,650, with downside potential appearing limited due to escalating Middle East tensions

Gold price (XAU/USD) remains under selling pressure for the second consecutive day on Thursday, staying subdued during the early European session, though the downside appears limited. Wednesday’s upbeat US ADP report highlighted continued stability in the labor market, prompting investors to scale back expectations of a large rate cut by the Federal Reserve (Fed) in November. This has bolstered the US Dollar, which continues its rebound from July 2023 lows, climbing to a three-week high, thereby pressuring the non-yielding yellow metal.

However, the potential for further escalation of geopolitical tensions in the Middle East offers some support to Gold. Iran launched over 200 ballistic missiles at Israel on Tuesday, and on Thursday, Israel responded with an air strike in central Beirut, Lebanon. This raises the risk of a broader conflict in the region, dampening risk appetite, as reflected in weaker equity markets, and providing a tailwind for the safe-haven XAU/USD. This makes it prudent to wait for significant selling momentum before making fresh bearish bets.

Daily Digest Market Movers: Gold price remains under pressure as USD strengthens, but geopolitical risks may limit losses

• The stronger US labor market data and hawkish comments from Fed Chair Jerome Powell on Monday have contributed to the US Dollar’s ongoing recovery from its lowest level since July 2023.
• The JOLTS Job Openings report on Tuesday revealed an unexpected increase of 329K, bringing the total to 8.040 million in August, up from the previous month's revised 7.711 million.
• On Wednesday, ADP reported that private-sector employers added 143K jobs in September, surpassing the forecast of 120K, while August’s figure was revised up to 103K.
• These signs of resilience in the US labor market have led investors to reconsider the likelihood of a 50-bps rate cut by the Fed in November.
• Meanwhile, hopes that China’s large-scale stimulus measures will fuel a sustained recovery in the world's second-largest economy are acting as a headwind for Gold on Thursday.
• On the geopolitical front, an Israeli air strike in central Beirut, Lebanon, on Thursday follows Iran’s firing of more than 180 ballistic missiles at Israel on Tuesday, increasing the risk of broader conflict in the Middle East.
• Given the mixed fundamentals, caution is warranted before placing aggressive directional bets on XAU/USD ahead of key US macro data, including Friday’s Nonfarm Payrolls report.
• In the meantime, Thursday’s US economic releases—Initial Jobless Claims and ISM Services PMI—along with speeches from influential FOMC members, could provide short-term trading opportunities around Gold.

Technical Outlook: Key levels to watch for Gold price

From a technical perspective, the current range-bound price action appears to be a bullish consolidation following the recent rally to record highs. Daily chart oscillators remain in positive territory, supporting the bullish outlook. Immediate resistance lies around the $2,672-$2,673 area, followed by the $2,685-$2,686 zone, which is close to last week’s all-time high. A break above $2,700 would be seen as a bullish trigger, likely extending the multi-month uptrend.

On the downside, support is seen at the $2,625-$2,624 area, which aligns with a short-term ascending channel resistance breakout point. A break below this level could lead to aggressive selling, pushing Gold below $2,600, with the next significant support at $2,560. Further declines could target the $2,535-$2,530 zone, with the potential to reach the $2,500 psychological mark.