Gold (XAU/USD) shows some resilience below the $4,000 psychological mark and rebounds from a three-month low it touched earlier this Friday. The commodity, however, lacks follow-through and remains depressed heading into the European session.
- How many of u looking at $GOLD FUTURE ??
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- China’s central bank is buying the dip in gold
- WTI Oil rallies above $99 as the Middle East war threatens to complicate further
Federal Reserve
Federal Reserve (Fed) officials recently signaled there is no urgency to raise interest rates. Traders, however, are still pricing in around an 80% chance that the US central bank will raise borrowing costs again at its December policy meeting. Moreover, oil-driven inflationary concerns underpin prospects for further Fed tightening, capping the upside for the non-yielding bullion.
In fact, crude oil prices sit near a one-month peak, touched on Tuesday, due to supply concerns stemming from escalating conflict in the Middle East. The fighting between Saudi Arabia and Yemen’s Iran-backed Houthi movement has escalated sharply, leading to Houthi drone and missile strikes on the kingdom’s airports and critical energy infrastructure. In further developments, Iran’s Islamic Revolutionary Guard Corps (IRGC) said that renewed US attacks could prompt Tehran to invade neighbouring countries and hit bases used in US military operations as part of its new offensive strategy.
FOMC meeting
This comes on top of a report that the US and Israel have drawn up plans for a short but intense military campaign against Iran after the US midterm elections and keeps the geopolitical risk premium in play. Moreover, hawkish Fed expectations help the safe-haven USD to recover slightly from a three-week low, which exerts additional downward pressure on the Gold price. Traders, however, might refrain from placing fresh directional bets and opt to wait for more cues about the Fed’s policy path. Hence, the focus will remain on next week’s highly anticipated two-day FOMC meeting.
The Fed will announce its decision on Wednesday and is widely expected to leave interest rates unchanged. In the absence of updated economic projections, investors will scrutinize the accompanying policy statement and Fed Chair Kevin Warsh’s comments during the post-meeting press conference. This will be followed by the release of the Advance US Q3 GDP report and the US Personal Consumption Expenditures (PCE) Price Index – the Fed’s preferred inflation gauge – next Thursday, which will play a key role in influencing the USD and provide a fresh impetus to the Gold price.
Technical Analysis
The overnight breakdown below a short-term trading range support and a sustained close below the $4,100 mark was seen as a key trigger for XAU/USD bears. Moreover, the Relative Strength Index at 34.34 hovers just above oversold territory, and the Moving Average Convergence Divergence (MACD) at -6.51 stays in negative territory, hinting that downside pressure persists despite some early signs of stabilization. The precious metal, however, shows some resilience below the $4,000 psychological mark, warranting some caution before positioning for further losses.
Meanwhile, any attempted recovery is more likely to attract fresh sellers and fizzle out near the trading range support breakpoint, now turned resistance, near the $4,065-$4,070 region. This is followed by the $4,100 round figure, which, if conquered, could trigger a short-covering rally and lift the XAU/USD pair to the $4,170 intermediate hurdle en route to the $4,200 mark. Sustained strength and acceptance above the latter is needed to back the case for a sustained near-term recovery.
