- Gold prices face selling pressure for the second consecutive day, though the downside remains limited.
- Optimism surrounding China’s stimulus measures diverts some safe-haven flows away from XAU/USD.
- Geopolitical risks and expectations of a dovish Fed help cushion further losses for the safe-haven asset.
Gold prices (XAU/USD) remain under pressure heading into the European session on Monday, but lack significant follow-through selling and hover just below last week’s all-time high. China’s series of stimulus measures continue to fuel investor appetite for riskier assets, providing a tailwind for the precious metal. However, the risk of escalating geopolitical tensions in the Middle East helps contain further downside for gold.
In addition, expectations that the Federal Reserve (Fed) will cut interest rates by another 50 basis points in its November policy meeting lend support to the non-yielding gold. Meanwhile, the US Dollar (USD) continues its sideways consolidation above its lowest level since July 2023, touched last Friday, indicating that the path of least resistance for XAU/USD remains upward. Traders now await Fed Chair Jerome Powell's upcoming speech for fresh direction.
Daily Digest Market Movers: Gold Price Traders Remain Cautious Amid Mixed Fundamental Signals
- Israel escalated its confrontations with Iran’s allies, including the Houthis in Yemen and Hezbollah in Lebanon, with aggressive airstrikes on Sunday. This has heightened fears of a full-scale war in the Middle East.
- The Israeli Defense Forces confirmed that dozens of aircraft targeted key infrastructure, such as power plants and a seaport in Ras Issa and Hodeidah, Yemen.
- Israeli airstrikes in Lebanon also killed Nabil Kaouk, deputy head of Hezbollah's Central Council, marking the seventh high-ranking official killed in just over a week.
- Investors are increasingly worried that the conflict could spiral out of control, potentially drawing in Iran and the United States, Israel's main ally, which could bolster safe-haven demand for gold.
- On the monetary front, current market sentiment suggests a strong likelihood that the US Federal Reserve will cut interest rates by 50 basis points for the second consecutive meeting in November.
- Despite these dovish expectations, the US Dollar has failed to make a meaningful recovery from its lowest levels since July 2023, helping to limit losses for non-yielding gold.
- St. Louis Fed President Alberto Musalem indicated on Friday that the US central bank may gradually cut interest rates after September’s larger-than-usual half-point reduction.
- Meanwhile, global risk sentiment received an additional boost after the People’s Bank of China announced on Sunday that it would direct banks to lower mortgage rates for existing home loans by October 31.
- This follows last week’s extensive fiscal, monetary, and liquidity support measures—China’s largest stimulus package since the pandemic—further supporting an optimistic market mood.
- China’s economic indicators have been mixed. The official Manufacturing PMI improved to 49.8 in September, beating expectations, while the NBS Non-Manufacturing PMI unexpectedly fell to 50.0. The Caixin Manufacturing PMI contracted to 49.3 from 50.4, and the Caixin Services PMI dropped to 50.3 from August’s 51.6.
- This upbeat market sentiment is exerting some downward pressure on gold, as traders await Fed Chair Jerome Powell’s speech for further market direction.
Technical Outlook: Gold Price Bulls Hold Firm, Ascending Channel Breakpoint in Focus
From a technical perspective, any further decline is expected to find solid support near the short-term ascending trend-channel resistance, around the $2,625 level. Below that, the $2,600 mark serves as a key area, which, if broken, could trigger a more significant downside move. Given the Relative Strength Index (RSI) on the daily chart is still near the overbought zone, the gold price could accelerate its decline towards the $2,560 intermediate support and then the $2,535-$2,530 region.
On the upside, the $2,670-$2,671 area now acts as the immediate resistance, followed by the $2,685-$2,686 zone, the record high reached last Thursday. A break above the $2,700 psychological level could trigger renewed bullish momentum, extending the multi-month uptrend.
