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Home » News » Gold Price Flat Lines Below $2,400 Amid Mixed Fundamental Cues, Downside Remains Cushioned

As of Wednesday, the price of gold (XAU/USD) has attracted attention from dip-buyers near the $2,379-2,378 range. The market saw a brief climb to a fresh daily peak during the European session. This movement comes in response to softer economic data from the United States, indicating a faster-than-expected slowdown in the world’s largest economy. As a result, investors are speculating about the possibility of the Federal Reserve (Fed) implementing more substantial interest rate cuts. Lower interest rates typically benefit gold, a non-yielding asset, by reducing the opportunity cost of holding it.

In addition to the U.S. economic outlook, concerns about an economic slowdown in China and escalating geopolitical tensions in the Middle East have also provided support for gold prices. However, a stronger U.S. Dollar (USD), buoyed by a recovery in U.S. Treasury bond yields and a generally positive risk sentiment, has limited any significant appreciation in gold.

Market Dynamics: Balancing Gold Price Influences
The recent easing of a global sell-off in equity markets, initially driven by fears of a potential U.S. The recession has put pressure on gold’s safe-haven attraction. This market correction, characterized by bargain buying, has tempered the upward momentum for gold prices.

On Tuesday, data revealed that the U.S. trade deficit narrowed by 2.5% in June, dropping to $73.1 billion from May’s $75.0 billion. This change was largely attributed to a 1.5% increase in exports, particularly in aircraft and U.S.-produced oil and gas. Despite this, the market is currently pricing in a 100% likelihood that the Fed will start lowering borrowing costs at its upcoming policy meeting in September, with a near 70% probability of a 50-basis-point rate cut. Such expectations are likely to cap U.S. bond yields and the USD, potentially supporting gold prices.

Geopolitical Tensions and Their Impact
Geopolitical tensions continue to influence market sentiment. Recently, the Lebanese group Hezbollah launched a series of drone and rocket attacks against Israel. These actions were in retaliation for Israel’s reported killings of a top Hezbollah commander and a Hamas leader the previous week. Such geopolitical worries frequently drive investors to safe-haven assets such as gold.

Technical Analysis: Key Levels and Market Trends
Technically speaking, the price of gold looks to be having difficulty rising above $2,400. The 50-day Simple Moving Average (SMA), around the $2,368-2,367 region, provides crucial support. If prices were to decline below this level, further support might be found near the $2,353-2,352 zone and subsequently at the $2,344 area, which aligns with the 100-day SMA. A sustained move below these levels could trigger a bearish trend, potentially pushing prices toward the $2,300 mark.
On the upside, a recovery above $2,400 would likely encounter resistance around the recent swing high of approximately $2,418. Should this level be surpassed, further buying could drive the price toward the $2,430 mark, with subsequent resistance near the $2,448-2,450 zone. A continued rally might see gold approaching the $2,468-2,469 region, en route to challenging the all-time peak of $2,483-2,484 reached in July. A decisive break above the psychological $2,500 mark could signal a new phase of appreciation for gold prices.

Conclusion: Market Outlook and Considerations
As the market awaits further economic data and developments, gold prices are likely to remain within a range, influenced by a complex interplay of economic indicators and geopolitical events. The upcoming Federal Reserve policy meeting and ongoing geopolitical tensions will be critical in shaping the near-term direction of gold prices. Investors should remain vigilant, considering both technical levels and fundamental factors when making trading decisions. With a blend of potential rate cuts, USD strength, and geopolitical risks, the gold market presents a dynamic landscape for both bulls and bears in the weeks ahead.

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Gold Prices Surge to Record High, Cross $2,720 Amid Global Uncertainty

Gold prices saw a significant rise, reaching around $2,720 in the early hours of Monday's Asian trading session.  This surge in demand for gold, a well-known safe-haven asset, is driven by heightened global uncertainties, including concerns about the US election and escalating geopolitical tensions.  Ongoing conflicts in the Middle East and potential economic challenges in China have also contributed to the rise in gold prices. Investors are turning to gold as a reliable option amidst these crises.  Alexander Zumpfe, a metals trader at Heraeus Metals Germany, commented, “With the war between Israel and Hezbollah intensifying, investors are seeking refuge in gold. Additionally, uncertainty over the US presidential election and possible monetary easing from the Federal Reserve are pushing gold prices higher.”  Expectations of further interest rate cuts by the US Federal Reserve are also supporting the precious metal’s value. The Fed recently lowered interest rates for the first time in over four years, and there is growing anticipation for additional cuts. According to the CME FedWatch Tool, there is a 90% chance of another rate reduction in November. Lower rates often increase the appeal of non-yielding assets like gold.  However, economic concerns in China could limit gold’s upward momentum. China, the world's largest consumer of gold, experienced slower-than-expected growth in its economy during the third quarter of the year. The National Bureau of Statistics reported a GDP growth of 4.6% for Q3, slightly below their target of 5%. This slowdown could impact global demand for gold.  Despite these challenges, gold continues to attract attention as a safe investment option in these uncertain times. 

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Gold Prices Steady as U.S. PPI is Moderate in September

The gold market remained stable as new data indicated that U.S. producer prices experienced moderate pressure in September.  According to the U.S. Labor Department’s report on Friday, the Producer Price Index (PPI) rose by 0.1% last month, following a 0.2% increase in August. This slight increase matched economists' predictions, who also expected a 0.1% rise.  Over the past 12 months, overall wholesale inflation rose by 1.8%, exceeding the expected 1.6%, but slightly lower than August’s revised figure of 1.9%. Meanwhile, core PPI, which excludes volatile food and energy prices, increased by 0.2% in September. This was in line with expectations and followed a 0.3% rise in August. The annual core PPI rose to 2.8%, above forecasts of 2.7% and August’s 2.4% figure.  After the 8:30 AM EDT data release, gold prices briefly spiked to session highs. Spot gold reached $2,650.19 per ounce but quickly returned to $2,646.60, marking a 0.63% gain for the day.  PPI is considered a key indicator of inflation since rising costs for producers are often passed on to consumers. Analysts suggest that if producer prices continue to ease, along with improving Consumer Price Index (CPI) inflation, the Federal Reserve could feel confident in reducing interest rates in upcoming meetings. This would likely support gold's long-term upward trend. 

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Gold Market Sees Consolidation Amid Shifting Economic Conditions

The gold market has entered a phase of consolidation, showing a slight decline after a strong rally in recent months. Since late July, gold futures surged nearly $300, rising from just below $2,400 per ounce to reach record highs. The lack of any significant correction during this rally highlighted the positive sentiment in the market.  Gold’s rapid rise to record levels was driven by signs that inflation was cooling and moving closer to the Federal Reserve’s 2% target. As inflation eased, investors grew optimistic about the possibility of the Fed lowering interest rates sooner rather than later. This optimism pushed gold prices up by $300 from March to September.  Even though the Federal Reserve was slow to cut rates initially, the bullish mood surrounding gold remained strong, allowing prices to continue climbing. The Fed eventually reduced rates by 50 basis points on September 18, which triggered another surge in gold prices. By September 26, gold hit an all-time high, with December contracts reaching $2,708.  However, last week saw gold prices begin to ease as the U.S. dollar strengthened and treasury yields rose, putting pressure on the market. Over the past week, gold prices fell five out of seven trading days, but these declines have not yet reached the point of a significant correction. The most notable drop came on September 30, marking the largest decrease since gold hit its record high.  As of 6 PM EDT, December gold futures were down by $11.30, settling at $2,661.90. This consolidation phase comes as market expectations for the Fed’s next moves begin to shift. Recent comments from Fed Chairman Jerome Powell have dampened hopes for another major rate cut in November. The CME FedWatch tool now shows an 84% chance of a smaller, 25-basis point cut, while a 16% chance remains for no cut at all.  This shift in market sentiment is largely due to a stronger-than-expected jobs report. The U.S. economy added 254,000 jobs, far surpassing the 140,000 forecasted, and the unemployment rate fell to 4.1%, adding complexity to the economic outlook.  While gold’s recent rally has not seen any major corrections, many experts believe the market is due for one soon. However, the situation could change depending on geopolitical events, such as a potential retaliation by Israel against Iran following last Tuesday’s attack. U.S. President Joe Biden has stated that Israel has the right to respond, though he urged a proportional response. Such developments could impact global markets, including gold.