Gold prices experienced a sharp decline on Tuesday, marking a near two-week low as the US Dollar continued to strengthen, exerting pressure on the precious metal. The Gold price (XAU/USD) saw a dip to around the $1,965 area, influenced by the dollar’s recovery from its recent low since September 20. The ongoing lack of major developments in the Israel-Hamas conflict also contributed to diverting flows away from the safe-haven asset.
Despite the prevailing economic uncertainties, particularly in China and Europe, keeping investors on edge, the prospect of the Federal Reserve (Fed) ceasing to raise interest rates provided some respite for the non-yielding yellow metal. The anticipation of key speeches by influential FOMC members, notably Fed Chair Jerome Powell, scheduled for Wednesday and Thursday, added to the market’s cautious sentiment.
Meanwhile, the US Treasury bond yields struggled to capitalize on the overnight rebound, reversing course on Tuesday amid growing expectations that the Fed would not pursue further rate hikes. The uncertainty surrounding the Fed’s future policy direction prompted some short-covering around the US Dollar, further exerting pressure on the Gold price.
The geopolitical risks in the Middle East, combined with the Eurozone’s contraction in the third quarter and a sharp decline in China’s trade balance, provided some support for the safe-haven nature of Gold. However, from a technical standpoint, the decline in Gold’s price may extend further towards the $1,954-1,953 support zone, with the $1,970 level acting as an immediate resistance.
Investors are now closely scrutinizing any comments from the Fed officials, particularly regarding the rate-hike path, for further cues about the direction of the US Dollar and the Gold price in the near term. Additionally, the upcoming US Trade Balance data release later during the early North American session is expected to provide short-term trading opportunities for market participants.