Gold prices (XAU/USD) remain subdued during the Asian trading session on Tuesday, hovering just above the lower boundary of a short-term trading range. Investors have been moderating their expectations for significant interest rate cuts by the Federal Reserve (Fed) in November, driven by signs of resilience in the US labor market, which poses a challenge for the non-yielding yellow metal.
The US Dollar (USD) has retreated from a seven-week high reached on Friday as traders adopt a cautious stance ahead of the FOMC meeting minutes set to be released on Wednesday. Additionally, the upcoming US Consumer Price Index (CPI) and Producer Price Index (PPI) reports on Thursday and Friday will further influence expectations regarding the Fed’s rate-cut strategy, providing fresh momentum for both the USD and gold prices.
Geopolitical risks stemming from ongoing conflicts in the Middle East are expected to support gold prices as a safe haven, potentially limiting any significant decline. Investors may want to wait for a sustained breakdown below a one-week trading range support before considering further positions in the XAU/USD following its recent pullback from the all-time high reached on September 26.
The release of the upbeat US jobs report for September on Friday has led traders to scale back bets on aggressive policy easing by the Fed, further pressuring gold prices. According to CME’s FedWatch tool, market participants currently see an 85% chance of a 25 basis point rate cut at the next FOMC meeting in November. Meanwhile, yields on the benchmark 10-year US government bond have surpassed the 4% threshold for the first time in two months.
Minneapolis Fed President Neel Kashkari remarked on Monday that the balance of risks has shifted away from higher inflation towards potentially higher unemployment. In contrast, St. Louis Fed President Alberto Musalem expressed support for additional interest rate cuts, indicating that economic performance will guide monetary policy.
Amid escalating tensions, Hezbollah launched rockets at Israel’s Haifa and a military base near Tel Aviv, prompting Israeli airstrikes on Beirut’s southern suburbs. Investors remain wary that these Middle East tensions could escalate into a broader conflict, which may provide tailwinds for gold as a safe haven.
China’s National Development and Reform Commission (NDRC) announced on Tuesday that the downward pressure on China’s economy is increasing, further impacting investor sentiment.
Traders are closely watching the release of the FOMC minutes on Wednesday, followed by key US inflation data later in the week.
From a technical perspective, the $2,632-$2,630 area represents a critical support level for gold, which may continue to shield the immediate downside. A decisive break below this range could trigger technical selling, potentially pushing XAU/USD beneath the $2,600 mark toward the next significant support near $2,560. Additional declines could extend toward the $2,535-$2,530 region and the psychological $2,500 level.
However, oscillators on the daily chart are indicating bullish momentum, suggesting that gold prices could remain favorable as long as they stay above the key support levels. The $2,670-$2,672 area may pose an immediate resistance, followed by the $2,685-$2,686 zone, which represents the all-time high from September. A breakthrough above $2,700 would be viewed as a fresh bullish signal, potentially fueling a continuation of the established multi-month uptrend.
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