The gold price (XAU/USD) continues to face challenges as it fails to sustain a recovery and experiences downward pressure for the second consecutive day. With a positive risk sentiment prevailing in the market, traditional safe-haven assets like gold have been overshadowed. Additionally, rising US Treasury bond yields, driven by expectations of tighter monetary policy from the Federal Reserve, have contributed to the decline of the non-yielding yellow metal.
However, the ongoing Israel-Hamas conflict has provided a cushion for the gold price. The geopolitical risks associated with the conflict, combined with expectations that the Fed will maintain interest rates in the upcoming months, offer some support to XAU/USD. Furthermore, the dovish Fed outlook weakens the US dollar, limiting losses for gold, which is denominated in the currency. Traders are likely to await cues regarding the Fed’s future rate hike trajectory before making decisive moves.
All eyes are now on Thursday’s scheduled speech by Fed Chair Jerome Powell, as it will have a significant impact on the gold price’s direction. In the interim, market participants will closely monitor Tuesday’s US economic data, including Retail Sales and Industrial Production figures, for potential market catalysts. Nonetheless, caution is advised due to the recent failure near the technically significant 200-day Simple Moving Average (SMA), which suggests the need for cautious positioning before anticipating a strong recovery from the $1,810 region, a multi-month low reached on October 6.
Title: Gold Price Faces Geopolitical Challenges Amid Ongoing Israel-Hamas Conflict
The gold price finds itself in the spotlight as it grapples with various factors affecting its trajectory. Amidst a positive risk tone, the precious metal struggles to make headway, while geopolitical tensions surrounding the Israel-Hamas conflict offer some support. As traders monitor the conflict’s development, the situation could potentially escalate into a wider proxy war involving Iran, leading to further flows into safe-haven assets like gold.
The Israel Defense Forces chief’s announcement of an upcoming entry into the Gaza Strip to combat the Hamas terror group intensifies the conflict. Israel’s call for Palestinians to evacuate to the Gaza City enclave’s southern area hints at an imminent large-scale ground assault. Contrary to reports of a ceasefire allowing humanitarian aid, Israel’s Prime Minister’s office denies such claims while preparations for an attack on Gaza continue. In a display of support to a key US ally, President Biden plans to visit Israel, amplifying the significance of the conflict’s international implications.
The United States, aiming to deter Iran and its proxies from further involvement, orders a second carrier group strike to the Eastern Mediterranean. Iran responds by warning of possible pre-emptive action through other fronts if a ground invasion occurs. Amidst these developments, the focus shifts to Federal Reserve Chair Jerome Powell’s scheduled speech, which is expected to shape the next phase of the gold price’s movement.
While the gold price remains influenced by geopolitical risks, attention also turns to US economic data, including Retail Sales figures. Recent US consumer inflation figures have left open the possibility of another Fed rate hike by year-end, supporting elevated US bond yields and strengthening the US dollar. Technical analysis suggests that the gold price needs to sustain its position above the 200-day SMA to regain bullish control. Key pivotal points lie at the $1,900 level, coinciding with the 100-day SMA, and the $1,932-1,933 zone, representing a significant resistance barrier.