Gold price oscillates in a range near one-week peak, positive risk tone caps gains
Gold price (XAU/USD) registered strong gains of over 1% on Monday and settled above the mid-$1,800 in the wake of the escalating Israeli-Palestinian conflict. The safe-haven precious metal, which tends to benefit from political and economic turmoil, further benefits from the ongoing retracement slide in the US Treasury bond yields, led by reduced bets for further rate hikes by the Federal Reserve (Fed). This, along with subdued US Dollar (USD) price action, pushes the non-yielding yellow metal higher for the third successive day on Tuesday, to over a one-week high.
Gold price has now recovered over $50 from a seven-month low touched last Friday, though seems to struggle to capitalize on the momentum. The overnight dovish remarks by Fed officials boost investors' confidence, which is evident from a generally positive tone around the equity markets and caps gains for the safe-haven XAU/USD. Investors also seem reluctant and prefer to wait on the sidelines ahead of this week's key releases from the United States (US) – the FOMC meeting minutes on Wednesday and the consumer inflation figures on Thursday.
Daily Digest Market Movers: Gold price consolidates its recent gains to over a one-week high
- Military conflict between Israeli forces and Palestinian Islamist group Hamas continues to drive some haven flows, lifting the Gold price to over a one-week high on Tuesday.
- Fed officials struck a cautious tone about the need for further rate hikes and said that the recent rise in the long-term US Treasury bond yields would help the Fed in its battle against inflation.
- Dallas Fed President Lorie Logan noted that the progress on inflation is encouraging and forced investors to trim their bets for another interest rate increase at the November meeting.
- Fed Vice Chair Philip Jefferson also sounded less hawkish and suggested the central bank proceed carefully with any further increases in the benchmark federal funds rate.
- The repricing of the Fed's rate-hike path leads to a further decline in the US Treasury bond yields, which keeps the US Dollar bulls on the defensive and further benefits the XAU/USD.
- The markets, however, are still pricing in the possibility of at least one more Fed rate hike by the end of this year, which should limit the downside for the US bond yields and the USD.
- Investors now look to the FOMC meeting minutes and the US consumer inflation figures, due on Wednesday and Thursday, respectively, for cues about the Fed's next policy move.
Technical Analysis: Gold price continues with its struggle to build on the Middle East conflict-inspired gains
From a technical perspective, some follow-through buying beyond the $1,865 level should pave the way for additional gains, towards the next relevant hurdle near the $1,885 area. This is closely followed by the $1,900 round figure, which nears the 50-day Simple Moving Average (SMA) and should now act as a key pivotal point. A sustained strength beyond will suggest that the Gold price has formed a near-term bottom and pave the way for additional gains towards testing the 200-day SMA, currently pegged near the $1,928-1,930 region.
On the flip side, any meaningful decline might now find some support near the $1,855-$1,850 zone ahead of the $1,835-1,834 region. A convincing break below the latter will suggest that the corrective bounce has run its course and drag the Gold price to the $1,820 support en route to the multi-month low, around the $1,810 zone. Furthermore, the occurrence of a death cross on the daily chart, wherein the 50-day SMA is holding well below the 200-day SMA, warrants caution for bullish traders and before positioning for further gains.