- Gold price stays defensive below $2,750 amid a nail-biter US presidential race.
- The US Dollar rebounds sharply as Trump trades return on a likely Republican victory.
- Technically, Gold price remains a ‘buy-the-dips’ trade, strong support aligns near $2,715.
Gold price has paused its rebound from multi-day lows early Wednesday, as sellers return on a fresh bout of US Dollar (USD) buying, as the exit polls of the 2024 US presidential election show a lead for the Republican nominee Donald Trump in more than a dozen states, including most of the critical battleground states.
Gold price skittish on US election exit polls
Trump won 14 states in the presidential race while the Democratic nominee Kamala Harris captured four states and Washington, D.C., per Edison Research.
Despite a potential Trump victory, nothing can be decisively said, as there are still plenty of results to come. Additionally, the exit polls in the swing states point too a close call between Trump and the Democratic nominee Kamala Harris.
Still, investors prefer to hold the US currency, as conviction grows stronger for a Republican win for the White House. The ‘Trump trades’ optimism has seeped back into markets, lifting the Greenback alongside the US Treasury bond yields and Bitcoin, diminishing the attractiveness of the non-yielding Gold price. US benchmark 10-year Treasury bond yields rise to the highest intraday level since July 3.
Markets believe Trump's policies on immigration, tax cuts and tariffs would put upward pressure on inflation, Treasury bond yields and the USD. Gold price is also eventually expected to benefit from Trump trades, as his foreign policies linked to China could trigger market unrest and panic in the medium- to long term.
But in the near term, Gold price will be at the receiving end until the results of the election are finally announced. That said, sentiment around the US election is expected to play a pivotal role in the Gold price action heading into US Federal Reserve (Fed) policy announcements due on Thursday.
Markets are fully pricing in a 25 basis points (bps) Fed rate cut this week but the focus will be on the central bank’s path forward on interest rates.
Gold price technical analysis: Daily chart
As observed on the daily chart, Gold price continues its struggle with the key $2,730 demand area as sellers fight back control.
The 14-day Relative Strength Index (RSI) has turned lower to near 59, backing the latest leg down in Gold price.
The leading indicator, however, holds its position above the 50 level, indicating a dip-buying opportunity for Gold buyers.
They need to reclaim the $2,746 resistance on a daily closing basis to resume its uptrend. That level is the 23.6% Fibonacci Retracement (Fibo) level of the latest record rally from the October 10 low of $2,604 to the new all-time high of $2,790.
The next bullish target is seen at the record high of $2,790.
On the other hand, a sustained move below $2,730 will challenge the 38.2% Fibo support of the same ascent at $2,718. At that level, the 21-day Simple Moving Average (SMA) coincides.
Acceptance below that level on a daily candlestick closing basis could threaten the $2,695 50% Fibo level.
Additional declines will call for a test of the 61.8% Fibo level at $2,673.
Gold FAQs
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.
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