Gold prices (XAU/USD) experienced a decline during Thursday’s Asian session, influenced by renewed buying of the US Dollar (USD), which typically dampens demand for USD-denominated commodities. Additionally, market expectations for smaller interest rate cuts by the Federal Reserve and rising concerns over the US fiscal deficit are pushing US Treasury bond yields higher. These factors contribute to a constrained upward potential for the non-yielding precious metal, which is currently exhibiting slightly overbought conditions on the daily chart.
Despite this, safe-haven demand remains buoyed by uncertainties surrounding the upcoming US presidential election on November 5 and ongoing tensions in the Middle East, potentially providing support for gold prices. Traders are likely to adopt a cautious stance, refraining from making aggressive bets ahead of the US Personal Consumption Expenditure (PCE) Price Index release, as well as the Nonfarm Payrolls (NFP) report scheduled for Friday. These reports are expected to offer insights into the Fed‘s interest rate trajectory and could impact market momentum.
In related market updates, the Automatic Data Processing (ADP) revealed that private sector employers added 233,000 jobs in October, exceeding the previous month’s upwardly revised figure of 159,000 and surpassing consensus estimates. This data reflects a resilient labor market, supporting the view that the economy remains robust and may result in a less aggressive easing approach by the Federal Reserve.
Furthermore, the US Bureau of Economic Analysis’s initial estimate indicates that the economy expanded at an annualized rate of 2.8% in the third quarter, a slowdown from the 3% growth recorded in the second quarter. Market participants are still anticipating a standard 25 basis points interest rate cut by the Fed in November, alongside concerns regarding deficit spending post-election, which are contributing to rising Treasury bond yields. The yield on the benchmark 10-year US government bond is hovering just below 4.3%, close to its highest level since July, which supports USD demand and presents challenges for gold prices.
The upcoming release of the US PCE Price Index may further influence the Fed’s rate-cut strategy and USD demand, potentially providing significant impetus for gold. Given the prevailing uncertainty around the US presidential election and escalating geopolitical tensions, the path of least resistance for the precious metal appears to be upward.
From a technical standpoint, gold remains below the upper boundary of an ascending channel, exhibiting overbought conditions on the Relative Strength Index (RSI) on the daily chart. Any upward movement is likely to encounter resistance near the $2,800 mark. If this level is decisively broken, it could signal a fresh bullish phase for gold.
Conversely, meaningful declines are expected to find support around the $2,750-2,748 range. Should selling pressure persist, gold prices may fall further towards the $2,732-2,730 support level, with potential declines extending to the $2,715 area and, if broken, down to $2,700. Additional support could be tested at the $2,675 zone and the $2,657-2,655 region.
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