Gold edges higher in line with broader bull trend
- Gold is rising as bulls push the price higher again following a temporary consolidation.
- The yellow metal weakened initially on Tuesday after the news that Israel will show restraint when it strikes Iran.
- Gold faces a headwind from a continued reduction in market bets that the Federal Reserve will need to aggressively cut interest rates.
The price of gold (XAU/USD) rebounded to the $2,650s on Tuesday, following a decline in response to the reduction of tensions in the Middle East. This occurred subsequent to an exclusive interview with The Wall Street Journal (WSJ) in which Israeli Prime Minister Benjamin Netanyahu reportedly informed US President Joe Biden that he would only target military targets in Iran during the anticipated retaliation.
This, in conjunction with a persistent decline in market expectations that the Federal Reserve (Fed) will reduce interest rates, is causing the US Dollar (USD) to appreciate and exerting pressure on the price of gold. The latest Michigan Consumer Sentiment Survey indicates that inflation expectations in the long-term (5-10 years) have “skyrocketed” to 7.1% in October, the highest in 40 years, according to analysts at The Kobeissi Letter. Additionally, US survey data is demonstrating that inflation expectations remain elevated.
The market’s disappointment with Beijing’s lack of clarity regarding its highly anticipated fiscal stimulus programme has been further compounded by concerns regarding China, the world’s largest consumer of gold, and the decline in its economy.
Central bank demand will continue to favor gold
Nevertheless, gold is receiving support from the anticipated sustained robust demand from global central banks. In recent years, the demand for the precious metal has increased in this sector as central banks accumulate gold for its safety, liquidity, and as a hedge against currency devaluation. The heads of three central banks at a recent panel discussion conducted at the London Bullion Market Association (LBMA) have stated that central bank buying is still anticipated to remain a significant force, despite the fact that it has decreased in 2024.
Kitco News reported that representatives of the Central Bank of Mongolia, Czech Republic, and Mexico “all agreed that Gold’s role as a reserve asset in global foreign reserves will continue to grow,” despite the fact that each central bank views the precious metal differently within its portfolio.
Calendar of gold market fluctuations
On Tuesday, the gold price is more susceptible to verbal influences than data-driven ones. The price of the precious metal could be influenced by the speeches of three Fed officials: Mary Daly, President of the San Francisco Fed, Adriana Kugler, Fed Governor, and Raphael Bostic, President of the Atlanta Fed.
In terms of data, the NY Empire State Manufacturing Index is the metric of the day for the Greenback, which may have implications for Gold.
Technical Evaluation: Gold encounters resistance at $2,670.
Following the conclusion of a decline, gold experiences a period of pause after rebounding. A three-wave (abc) correction that culminated at the lows on October 10 appears to have resumed the precious metal’s dominant uptrend.
On Monday, gold encountered resistance at approximately $2,670; however, it ultimately declined. However, a breach of $2,673 would elicit bullish confirmation and likely result in a continuation of the upward trend to the all-time high of $2,685. A break above that would suggest a continuance to the subsequent target at $2,700, which is a psychological level and round number. The odds continue to favour more upside, as gold is in an uptrend on a short, medium, and long-term basis, and the theory that “the trend is your friend” is in effect.
A break below $2,600 (the low of wave c on the chart) would be necessary to reverse the uptrend and shift the short and medium-term outlooks to the adverse.
