- Gold price holds previous gains below record high, as traders digest Israel-Iran geopolitical risks.
- The Dollar pauses recovery amid risk reset, ahead of US ADP data and Fedspeak.
- The daily technical setup favors Gold buyers, as the RSI stays firm in the bullish zone.
Gold price is consolidating the previous recovery near $2,660 in Asian trading on Wednesday, aa buyers catch a breather amid the Iran-Israel geopolitical escalation while awaiting the key US ADP Employment Change data and a flurry of speeches from US Federal Reserve (Fed) policymakers.
Gold price keeps an eye on geopolitics, US events
Despite persisting fears of an Iran-Israel conflict turning into a wider regional war, the Asian markets have calmed down a bit, as they believe that Iran may not pursue a full-fledged war with Israel and that it would urge de-escalation in the same way as it did after the April missile strikes.
Iran’s Revolutionary Guard said early Wednesday that Iranian forces on Tuesday used hypersonic Fattah missiles for the first time and 90% of its missiles successfully hit their targets in Israel.
“Our action is concluded unless the Israeli regime decides to invite further retaliation. In that scenario, our response will be stronger and more powerful,” Iranian Foreign Minister Abbas Araqchi said in a post on X early Wednesday.
Tehran said this attack was in response to Israeli killings of militant leaders and aggression in Lebanon against the Iran-backed armed movement Hezbollah and in Gaza.
If Middle East geopolitical tensions dissipate on no further potential aggression from Israel, the traditional safe-haven, Gold price, will likely come under renewed selling pressure.
However, the US ADP Employment Change data and Fedspeak will be next of note for the US Dollar and Gold price, as the events could provide fresh hints on the size of the next Fed interest rate cut. The US private sector employment is expected to rise by 120K in September, up from a 99K job gain in August.
Tuesday’s mixed US ISM Manufacturing PMI and JOLTS Job Openings data failed to offer any clear signals on the direction of the Fed interest rate outlook. Meanwhile, Atlanta Fed President Raphael Bostic repeated that he is “open to another half-percentage point rate cut if the labor market shows unexpected weakness.”
Markets continue pricing in about a 37% chance that the Fed will lower rates by 50 basis points (bps) in November, down from 53.3% seen at the start of the week, according to CME Group's FedWatch Tool.
Besides, the news of Iranian bombings on Israel dominated markets and triggered a broad risk-aversion wave, spiking up the safety bets in Gold price, the US Dollar and government bonds.
Gold price technical analysis: Daily chart
The daily technical setup for Gold price remains constructive as the 14-day Relative Strength Index (RSI) holds firm near 68.00, despite turning slightly lower.
Gold price needs to yield a daily candlestick closing above the static resistance near $2,670 for a renewed upside. The next resistance is aligned at the record high of $2,686.
Further up, buyers will target the $2,700 round level, followed by the rising trendline resistance at $2,730.
Alternatively, if Gold sellers flex their muscles, acceptance below the September 24 low of $2,623 is critical to unleashing further downside toward the $2,600 threshold.
Gold sellers could then challenge the September 20 low of $2,585, where the 21-day Simple Moving Average (SMA) hangs around.
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.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
AUD/USD: Next upside target comes at 0.6550
AUD/USD managed well to shrug off the marked advance in the Greenback as well as geopolitical tensions, regaining the area above the 0.6500 hurdle ahead of preliminary PMIs in Australia.
EUR/USD: Further losses now look at 1.0450
Further strength in the US Dollar kept the price action in the risk-associated assets depressed, sending EUR/USD back to the 1.0460 region for the first time since early October 2023 prior to key releases in the real economy.
Gold faces extra upside near term
Gold extends its bullish momentum further above $2,660 on Thursday. XAU/USD rises for the fourth straight day, sponsored by geopolitical risks stemming from the worsening Russia-Ukraine war. Markets await comments from Fed policymakers.
Ethereum Price Forecast: ETH open interest surge to all-time high after recent price rally
Ethereum (ETH) is trading near $3,350, experiencing an 10% increase on Thursday. This price surge is attributed to strong bullish sentiment among derivatives traders, driving its open interest above $20 billion for the first time.
A new horizon: The economic outlook in a new leadership and policy era
The economic aftershocks of the COVID pandemic, which have dominated the economic landscape over the past few years, are steadily dissipating. These pandemic-induced economic effects are set to be largely supplanted by economic policy changes that are on the horizon in the United States.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.