Gold (XAU/USD) prices have rebounded significantly from earlier intraday losses, climbing back above the $2,740 level as the European session approaches on Monday. This recovery is fueled by ongoing safe-haven demand due to rising tensions in the Middle East and jitters surrounding the upcoming U.S. elections.
Safe-Haven Demand: Continued geopolitical uncertainty has led to increased investment in gold, which is traditionally viewed as a safe haven during turbulent times.
U.S. Dollar Dynamics: A modest pullback in the U.S. dollar, which had reached its highest level since July 30, provides additional support for gold prices. A weaker dollar makes gold more attractive to holders of other currencies.
Federal Reserve Rate Cuts: The potential for smaller interest rate cuts by the Federal Reserve, along with concerns about budget deficits post-election, keeps U.S. Treasury yields elevated. Higher yields can typically pressure gold, but the current market sentiment seems to offset this effect.
Equity Market Sentiment: A positive tone in equity markets may also limit gold’s upside potential as investors seek higher returns in stocks.
Upcoming Economic Data: Traders are cautious ahead of important U.S. economic releases this week, including the Advance Q3 GDP report, the Personal Consumption Expenditures (PCE) Price Index, and the Nonfarm Payrolls (NFP) report.
From a technical standpoint, recent attempts to break above the $2,748-$2,750 range have met with resistance, suggesting caution for bullish traders. The price action over the past week has been largely range-bound, indicating indecision among traders regarding the next major price movement.
Resistance Levels: A sustained move above $2,748-$2,750 could allow gold to retest recent highs near $2,658-$2,659. A further ascent might see prices targeting the $2,770 area, corresponding to a long-term ascending trend-line resistance, eventually aiming for the $2,800 mark.
Support Levels: On the downside, if gold breaks below the $2,720-$2,715 region, support is likely around $2,700. A decisive drop below this level could lead to further declines, with potential targets at the $2,675 area and eventually towards the $2,657-$2,655 horizontal support zone.
Gold prices are experiencing a recovery, bolstered by safe-haven demand and a retreating dollar. However, traders are advised to remain cautious, particularly in light of key upcoming economic data that could influence market sentiment and price direction. The current range-bound activity suggests that significant movement may hinge on breaking established support or resistance levels.
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