NEWS | 10/12/2024 | By TotaFX Capital
The price of gold (XAU/USD) trades around $2,670, maintaining its footing despite fluctuating market conditions. The yellow metal has shown resilience due to its safe-haven appeal while balancing opposing forces from a stronger U.S. dollar and optimistic market sentiment.
Market Drivers Influencing Gold
Geopolitical Tensions and Central Bank Activity
- Geopolitical Risks:
- The ongoing Russia-Ukraine war, Middle East unrest, and political instability in Asia continue to support gold as a hedge against uncertainty.
- Increased safe-haven flows have emerged due to global economic concerns.
- Central Bank Demand:
- The People’s Bank of China reported increased gold purchases, marking renewed interest in the metal as a reserve asset.
Macroeconomic Factors
- Federal Reserve Expectations:
Market participants are pricing an 85% probability of a 25-basis-point rate cut in December, as indicated by the CME FedWatch Tool. This dovish outlook has tempered Treasury yields, indirectly benefiting gold. - U.S. Dollar Recovery:
Recent strong U.S. economic data has bolstered the dollar, applying some downward pressure on gold prices.
Technical Analysis for XAU/USD
Support and Resistance Levels
- Immediate Support: $2,650 (200-period EMA).
- Next Support Zone: $2,625-$2,620, followed by $2,600.
- Resistance Levels:
- $2,700 (key psychological level).
- $2,735-$2,740 (upper target range).
Indicators
Technical oscillators on the daily chart show bullish momentum gaining traction, suggesting further upside potential. However, a break below key support could trigger a bearish retracement.
Gold prices currently hover around $1,973 per troy ounce, reflecting a mix of influences shaping the market. Geopolitical tensions, including the Ukraine conflict and uncertainties surrounding NATO’s involvement, have bolstered gold’s appeal as a safe-haven asset. Meanwhile, expectations of a Federal Reserve pause in rate hikes, coupled with a strong U.S. dollar and elevated Treasury yields, have tempered upward momentum. Central banks, particularly China’s, continue to purchase gold, reinforcing demand. Seasonally, December is a key month for gold, supported by festive buying in markets like China and India, and historical trends suggest potential upward pressure as 2025 approaches. Technically, gold faces resistance at $2,000, with strong support near $1,940, favoring a buy-on-dips strategy. Long-term projections remain bullish, underpinned by persistent inflation concerns and geopolitical instability, setting the stage for sustained investor interest in gold as a hedge
Gold remains influenced by a confluence of geopolitical and economic factors, maintaining its role as a key safe-haven asset amidst global uncertainties. Geopolitical risks, particularly the prolonged Ukraine conflict and growing tensions across various regions, have bolstered its appeal. Central banks, notably China, have resumed gold purchases, providing significant demand support.
On the economic front, attention is fixed on the Federal Reserve’s monetary policy stance, with markets anticipating a pause in rate hikes but weighing the implications of persistently high inflation. Seasonal demand, particularly in India and China, further enhances gold’s allure during December, aligning with historical patterns of strong end-of-year performance.
Technically, gold is poised for a potential consolidation, with analysts suggesting that current movements favor a buy-on-dips strategy. Long-term projections remain optimistic, driven by inflation concerns, geopolitical instability, and continued central bank interest in the metal. Gold’s resilience reflects its enduring status as a hedge against market volatility and inflationary pressures.
Key Upcoming Events
- U.S. Consumer Price Index (CPI):
- Scheduled for release this week, the CPI report will be a critical indicator of inflation trends, potentially influencing Federal Reserve policies and, by extension, gold prices.
- Geopolitical Developments:
- Ongoing monitoring of global hotspots, including trade tensions and conflict zones, remains essential for predicting gold’s trajectory.
Outlook by TotaFX Capital
Gold remains a critical asset in diversified portfolios, balancing risk during economic and geopolitical uncertainties. While the short-term trend indicates consolidation, long-term prospects favor upward momentum given the current macroeconomic environment.
Stay informed with TotaFX Capital for the latest updates and in-depth analysis on gold and other financial markets.
