- Gold price hovers around $2,650 early Tuesday, consolidating the previous decline.
- Despite lingering Chinese economic risks, the US Dollar pulls back with Treasury bond yields.
- Gold price could find fresh demand as long as a 21-day SMA holds at $2,635. The daily RSI stays bullish.
Gold price is trading modestly flat near $2,650 early Tuesday, licking its wounds after retreating from a six-day high of $2,667 set on Monday.
Gold price buyers test their luck
The tepid recovery attempt in Gold price is sponsored by a mild correction in the US Dollar (USD) against its major rivals from over two-month highs. Meanwhile, retreating US Treasury bond yields on renewed haven flows into the government bonds exert downward pressure on the USD, allowing Gold price buyers to briefly come up for air.
Amid a quiet Asian affair, China’s economic worries persist and dent risk sentiment. The latest data showed that Chinese exports grew at the slowest pace in five months in September. Further, a lack of specifics on China’s fiscal stimulus announced last Saturday remains a drag on investors’ confidence.
However, it remains to be seen if Gold price builds on the rebound, as markets continue to bet on a smaller - 25 basis points (bps) interest rate cut by the US Federal Reserve (Fed) in November, with a probability of such a move seen at about 86%, according to the CME Group’s FedWatch Tool.
The Greenback extended its previous week’s advance and hit its highest in over two months across its competitors after Fed Governor Christopher Waller said Monday urged "more caution" on rate cuts ahead, citing recent economic data. "Whatever happens in the near term, my baseline still calls for reducing the policy rate gradually over the next year," Waller added.
Joining the chorus, Minneapolis Fed President Neel Kashkari said on Monday that the monetary policy is still in a restrictive stance, adding further "modest" rate cuts could be appropriate, per Reuters.
Also, Gold price could face headwinds from easing geopolitical tensions between Israel and Iran after the Washington Post (WaPo) cited two officials familiar with the matter, as saying that Israeli Prime Minister Benjamin Netanyahu told the US that Israel would strike Iranian military, not nuclear or oil, targets. The report suggests that there will be a more limited counterstrike aimed at preventing a full-scale war.
Attention now turns toward speeches from more Fed policymakers for fresh trading impetus in the US Dollar and the Gold price, as full markets return later in the American session on Tuesday. Gold traders could also resort to position adjustments ahead of Thursday’s US Retail Sales data release.
Gold price technical analysis: Daily chart
Gold price stays supported above the key 21-day Simple Moving Average (SMA) support, now at $2,635, so far this week.
The 14-day Relative Strength Index (RSI), however, holds firm above the midline, suggesting that any dip in Gold price could be a good buying opportunity in the near term.
If the Gold price recovers, the next bullish target is seen at the previous high of $2,667, followed by the intermittent high at $2,670.
Further up, the record high at $2,686 will come into play.
Conversely, the immediate support is seen at the 21-day SMA at $2,632, below which the three-week lows near the $2,600 threshold will be tested.
A sustained break below the latter could extend the downside toward the September 20 low of $2,585.
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
GBP/USD retreats below 1.3050 after UK data
GBP/USD stays on the back foot and trades in negative territory below 1.3050 early Tuesday. The data from the UK showed that the ILO Unemployment Rate declined to 4% in the three months to August, with Employment Change rising 373K, but failed to support Pound Sterling.
EUR/USD drops below 1.0900 amid resurgent USD demand
EUR/USD drifts lower below 1.0900 in European trading on Tuesday. Resurgent US Dollar demand and a cautious risk tone weigh on the main currency pair. Traders now look to Germany's ZEW survey and Eurozone Industrial Production data ahead of Fedspeak.
Gold price remains depressed amid smaller Fed rate cut bets; lacks follow-through selling
Gold price ticks lower for the second straight day amid smaller Fed rate cut bets and a bullish USD. Signs of a slowdown in China – the biggest bullion consumer – further undermine the XAU/USD.
Bitcoin targets $70,000 as bullish momentum builds
Bitcoin is retesting its key resistance level, and a solid close above this threshold could fuel its ongoing rally. Meanwhile, Ethereum has successfully breached its resistance, signaling potential upward momentum, while Ripple approaches its crucial resistance barrier.
RBA widely expected to keep key interest rate unchanged amid persisting price pressures
The Reserve Bank of Australia is likely to continue bucking the trend adopted by major central banks of the dovish policy pivot, opting to maintain the policy for the seventh consecutive meeting on Tuesday.
Five best Forex brokers in 2024
VERIFIED Choosing the best Forex broker in 2024 requires careful consideration of certain essential factors. With the wide array of options available, it is crucial to find a broker that aligns with your trading style, experience level, and financial goals.