The gold price (XAU/USD) witnessed a strong surge on Wednesday, reaching its highest level since August, around the $1,962-1,963 range. This rally was fueled by concerns over escalating tensions in the Middle East. However, the continuous rise in US Treasury bond yields, paired with profit-taking due to increased demand for the US Dollar (USD), limited the gains for the non-yielding yellow metal.
Although there was a slight pullback, the retracement lacked follow-through and stalled near the $1,938 level. Geopolitical tensions continued to attract some safe-haven flows, supporting the gold price for the third consecutive day on Thursday. However, the bullish sentiment lacked follow-through as market participants hesitated to place aggressive bets ahead of Fed Chair Jerome Powell’s upcoming speech. Investors eagerly await cues about the Federal Reserve’s policy outlook, which could have implications for both the US Dollar and the XAU/USD pair.
In terms of market movers, the gold price has been influenced by concerns that the Israel-Hamas conflict may expand into other parts of the Middle East region. A summit between Egyptian and Palestinian leaders with US President Joe Biden was called off following a reported blast at a Gaza hospital that claimed the lives of hundreds of Palestinians. The UK Times also reported that Israeli Prime Minister Netanyahu received private support from President Biden to proceed with a ground invasion of Gaza. Biden emphasized that the US would provide Israel with the necessary means for self-defense, highlighting the severe actions committed by Hamas.
Additionally, upbeat US Retail Sales figures released on Tuesday, signaling a strong end to the third quarter, raised fears of persistent inflation. This strengthened the Federal Reserve’s hawkish stance, bolstering US Treasury bond yields and supporting the US Dollar, which in turn capped gains for the XAU/USD pair. The yield on the benchmark 10-year US government bond broke fresh records, approaching the psychological 5% mark.
Moving forward, investors will closely monitor key data such as US Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index, and Existing Home Sales for short-term market direction. All eyes will be on Fed Chair Jerome Powell’s scheduled speech, which will be scrutinized for insights into the future path of interest rate hikes.
From a technical perspective, the breakout above the 200-day Simple Moving Average (SMA) and the subsequent strength beyond the $1,947-1,948 supply zone have favored the bulls. Positive territory oscillators on the daily chart indicate potential upside momentum. Confirmation through sustained buying above the overnight swing high around $1,962-1,963 would mark a critical threshold for further gains. The XAU/USD pair may then target the $1,982 intermediate hurdle before aiming to surpass the psychological $2,000 mark.
Conversely, weakness below the $1,948-1,947 area is likely to find support near the 200-day SMA around $1,930, followed by the 100-day SMA near $1,922. Further support lies in the $1,930 zone, and a breach of this level could lead to a challenge of the $1,900 mark. The $1,900 level coincides with the 50-day SMA and is expected to act as a robust support zone. A decisive break below this level would negate the positive outlook and shift the near-term bias in favor of bearish traders.