Gold prices, represented by XAU/USD, have struggled to regain momentum after a late rebound from the $1,908 level on the previous day, marking the second consecutive day of decline on Tuesday. This decline in the precious metal’s value is primarily attributed to several global factors.
The market continues to observe a predominantly bearish sentiment in the European session, influenced by a positive risk tone. This shift towards risk-on sentiment is undermining the appeal of traditional safe-haven assets, including gold. Furthermore, the surge in U.S. Treasury bond yields, fueled by increasing expectations of further policy tightening by the Federal Reserve (Fed), is another key factor exerting downward pressure on the non-yielding precious metal.
However, amidst these challenges, the decline in gold prices is somewhat cushioned by the ongoing Israel-Hamas conflict. This geopolitical turmoil, combined with the growing consensus that the Federal Reserve (Fed) is likely to maintain its interest rates for a second consecutive time in November, provides some support to XAU/USD. Additionally, the dovish expectations surrounding the Fed’s future interest rate hikes have put the U.S. Dollar (USD) bulls on the defensive, thereby limiting losses for the U.S. Dollar-denominated gold.
Traders, in light of these complex factors, may choose to exercise caution and await more explicit signals regarding the Fed’s monetary policy trajectory before making directional bets.
The upcoming focus in the market will center on Fed Chair Jerome Powell’s scheduled speech on Thursday, which is anticipated to shape the next direction for gold prices. In the interim, the Tuesday U.S. economic agenda featuring monthly Retail Sales data and Industrial Production figures will be scrutinized for potential market-moving developments. It is worth noting that the recent inability to breach a technically significant 200-day Simple Moving Average (SMA) suggests that caution should be exercised, especially before positioning for a robust recovery from the $1,810 region or the multi-month low recorded on October 6.
