- Gold price prolongs its uptrend and advances to a near three-month high on Friday.
- Geopolitical risks continue to drive haven flows and lend support to the XAU/USD.
- Elevated US bond yields, a stronger USD might cap gains amid the overbought RSI.
Gold price (XAU/USD) scales higher for the fourth successive day on Friday – also marking the fourth day of a positive move in the previous five – and climbs to a near three-month peak, around the $1,982 region during the Asian session. Concerns over geopolitical tensions in the Middle East continue to drive investors towards traditional safe-haven assets and boost demand for the precious metal. Apart from this, growing acceptance that the Federal Reserve (Fed) will keep interest rates unchanged for the second straight time in November turns out to be another factor benefitting the non-yielding yellow metal.
Furthermore, this week’s sustained breakout through the very important 200-day Simple Moving Average (SMA) prompts some technical buying and provides an additional boost to the Gold price. Bulls, meanwhile, seem unaffected by elevated US Treasury bond yields and bets for one more Fed rate hike move by the end of this year, which helps revive the US Dollar (USD), albeit doing little to hinder the ongoing positive momentum. That said, overbought conditions on hourly charts warrant some caution before placing fresh bullish bets on the XAU/USD and positioning for a further appreciating move.
Daily Digest Market Movers: Gold price continues scaling higher as Middle East tensions boost safe-haven demand
- Concerns that the Israel-Hamas war could spill over to other Middle Eastern nations and impact the world economy continue to benefit the safe-haven Gold price.
- Israel pounded the Gaza Strip with airstrikes on Thursday and appeared to be getting closer to a full-scale invasion of the seaside enclave ruled by Hamas.
- The Israeli military massed troops and equipment near the Gaza border, while the Israeli missiles also struck targets in Lebanon and Syria.
- Egypt has also been directly affected by the escalation in the conflict, with Israel repeatedly bombing the Rafah border crossing between Egypt and Gaza.
- Federal Reserve Chairman Jerome Powell said that additional interest rate hikes could be warranted in view of economic resiliency and labor market tightness.
- The benchmark 10-year US Treasury bond yield touches a fresh 16-year high on Thursday and assists the US Dollar in attracting some dip-buying on Friday.
- Elevated US bond yields, a modest USD strength, along with overbought conditions on hourly charts, might keep a lid on any further gains for the XAU/USD.
Technical Analysis: Gold price seems poised to reclaim the $2,000 psychological mark for the first time since May
From a technical perspective, this week’s break above the 200-day SMA and a subsequent move beyond the $1,947-1,948 supply zone favour bullish traders. That said, the Relative Strength Index (RSI) on hourly charts is flashing overbought conditions and makes it prudent to wait for some near-term consolidation before the next leg up. Nevertheless, the Gold price seems poised to surpass the July swing high, around the $1,987 region, and aim to conquer the $2,000 psychological mark for the first time since May.
On the flip side, any meaningful corrective decline now seems to find decent support and attract fresh buyers near the $1,947-1,948 resistance breakpoint. This should help limit the downside near the 200-day SMA, currently pegged around the $1,930 zone. A convincing break below, however, might prompt some technical selling and drag the Gold price to the weekly low, around the $1,908 region en route to the $1,900 round figure. The latter coincides with the 50-day SMA support and should act as a strong base for the XAU/USD.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Canadian Dollar.
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.