Gold prices (XAU/USD) experienced a slight decline on Thursday, influenced by a stronger U.S. dollar and rising Treasury yields, which reduced investor interest in the precious metal.
The recent buying pressure on the dollar has overshadowed gold’s appeal as a safe-haven asset. This shift occurs despite ongoing uncertainties surrounding the upcoming U.S. presidential election and geopolitical tensions in the Middle East.
The dollar’s rally stems from investor expectations of smaller, more gradual rate cuts by the Federal Reserve, coupled with concerns over the increasing U.S. fiscal deficit. These factors have contributed to rising U.S. Treasury yields, adding pressure on non-yielding assets like gold.
In October, private-sector employment showed significant growth, with ADP reporting an increase of 233,000 jobs—far exceeding September’s 159,000 and surpassing market forecasts. This growth suggests a resilient labor market, reinforcing the Fed‘s cautious approach toward rate cuts. Recent U.S. economic data complicates the outlook further.
According to the Bureau of Economic Analysis, the U.S. economy expanded at an annual rate of 2.8% in the third quarter, slightly below the previous quarter’s 3% growth. While economic activity remains strong, this moderation may not justify aggressive Fed rate cuts, bolstering the dollar’s strength.
Investors are preparing for key economic indicators, including the U.S. Personal Consumption Expenditure (PCE) Price Index and the Nonfarm Payrolls (NFP) report, set to be released on Friday. These reports are expected to shed light on inflation and employment trends, influencing the Fed’s policy decisions.
Analysts predict a 25 basis point cut during the Fed’s November meeting. However, the strong dollar and rising Treasury yields continue to limit gold’s potential for gains.
With inflation and employment data looming, market participants are adopting a cautious stance. If Treasury yields remain high, gold may struggle to attract interest compared to dollar-denominated assets. Nonetheless, any unexpected results from the economic reports could renew interest in gold, especially if uncertainties regarding the U.S. election and geopolitical issues persist.
Currently, gold is trading around $2,784, down 0.09%, as it faces critical resistance near $2,790.22. This resistance forms a double-top pattern, which may hinder further price increases unless it is breached.
The 50-day EMA at $2,762.90 offers nearby support, suggesting an underlying bullish trend. However, the double-top pattern presents a potential ceiling for gains.
Should prices break above $2,790.22, a bullish move toward $2,803.33 and $2,815.26 could occur. Conversely, a decline below the immediate support at $2,772.47 may trigger further downside, targeting $2,760.49.
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