- Gold is trading just below its record high, down 0.09%, as US Treasury yields rise over 10 basis points to 4.192%.
- Safe-haven demand persists amid ongoing hostilities in the Middle East and uncertainty surrounding the US elections, with polls indicating a tight race between Harris and Trump.
- While Federal Reserve officials suggest gradual rate cuts, a 25 basis point cut at the November meeting is still largely priced in.
Gold prices reached another record high during Monday’s North American session but paused their advance due to rising US Treasury bond yields and a strong US Dollar. Over the past five trading days, heightened tensions in the Middle East and uncertainty surrounding the US presidential election have driven increased demand for safe-haven assets. As of this writing, XAU/USD is trading at $2,718, down slightly by 0.09%.
Market sentiment has turned negative amid a close race in the US election. According to Reuters, Vice President Kamala Harris currently leads former President Donald Trump 45% to 42% in the popular vote, but the ultimate outcome will be determined by the state-by-state results of the Electoral College.
“Polls indicate that Harris and Trump are in a tight race in key battleground states, with many results falling within the margins of error,” according to Reuters.
Meanwhile, US Treasury bond yields surged over ten basis points, with the 10-year T-note reaching a yield of 4.192%. As a result, the US Dollar Index (DXY), which measures the dollar’s value against a basket of six currencies, rose by 0.50%, hitting a new two-month high of 104.01.
Tensions in the Middle East escalated as Israel reported that a projectile from Lebanon struck an open area in central Israel. Additionally, Iran’s envoy to the United Nations criticized President Biden’s remarks in Berlin regarding Israel’s plans to attack Iran, calling them “inflammatory.”
Federal Reserve (FED) officials have made headlines, with Dallas Fed President Lorie Logan emphasizing the need for flexibility in monetary policy, supporting the idea of gradually lowering borrowing costs.
Minneapolis Fed President Neel Kashkari echoed Logan’s sentiments, predicting modest rate cuts over the coming quarters, while cautioning that signs of weakness in the labor market could lead to quicker cuts. He stressed that the Fed “definitely” aims to avoid a recession.
Despite these discussions, the Federal Reserve is widely expected to implement a 25 basis point rate cut at the November meeting, with the odds standing at 87%, according to data from the CME FedWatch Tool.
Daily Digest: Market Movers - Gold Prices Climb Despite Strong US Data
- US Initial Jobless Claims: For the week ending October 19, claims are expected to rise from 241,000 to 247,000.
- US Business Activity: October projections indicate an improvement in the manufacturing sector according to S&P Global, while the Services PMI is anticipated to dip slightly from 55.2 to 55.
- Fed Easing Projections: Data from the Chicago Board of Trade, based on the December Fed funds rate futures contract, shows investors are estimating 46 basis points of Fed easing by year-end, a slight decrease compared to last week.
XAU/USD Technical Outlook: Gold Price Retraces Below $2,720
Gold prices are poised to continue their upward trajectory, although the emergence of a ‘gravestone doji’ pattern could signal a potential pullback. Momentum indicators suggest that while buyers remain dominant, they are starting to lose some strength, as reflected in a flat Relative Strength Index (RSI), which, despite being bullish, shows signs of weakening.
If XAU/USD surpasses the October 21 high at $2,740, the next targets could be $2,750 and then $2,800.
On the other hand, if the price retreats from record highs and falls below $2,700, it may trigger a pullback. Key support levels to watch include the October 17 high at $2,696 and the October 4 high at $2,670.
