As geopolitical unrest deepens in the Israel-Palestine region, gold prices exhibit potential for continued growth. Concurrently, the US Dollar remains stable, notwithstanding the robust US Retail Sales data for September. Furthermore, with the 10-year US Treasury yields climbing to 4.85%, there’s anticipation for an additional interest rate hike by the Federal Reserve.
On Wednesday, gold reached a new four-week peak of $1,943. Although it experienced a slight retraction, the value of gold robustly maintained its position above the significant 20-Daily Moving Average (DMA), marked at $1,930.
The 14-day Relative Strength Index (RSI) currently trends above the midline, implying potential for further upward momentum. Upcoming resistance benchmarks include the September 20 peak of $1,947, with the subsequent level at the September 1 high of $1,953. A consistent surge past these markers could instigate a renewed upward trend, potentially reaching the $1,970-$1,980 range. Conversely, should the gold price not secure its position above the 200 DMA ($1,930), a decline toward the 100 DMA ($1,923) might ensue. Moreover, a further descent might bring the previous day’s low of $1,912 into focus for market sellers.
Fundamental Market Overview
Despite drawing back from its four-week zenith of $1,943, gold sustains its recent gains, influenced by the relatively subdued US Dollar and a decline in US Treasury bond yields. The financial market is currently awaiting insights from Federal Reserve representatives, particularly the forthcoming address by Fed Chair Jerome Powell.
Interestingly, gold witnessed a surge following the release of encouraging economic data from China. Early Wednesday saw the US Dollar in a modest decline, correlating with a pullback in the US Treasury bond yields, which was in part due to heightened investor interest stemming from China’s economic announcements.
China’s National Bureau of Statistics revealed that the nation’s economic growth rate for Q3 stands at 4.9%, surpassing the previous quarter’s 6.3% and the forecasted 4.4%. Further bolstering this positive economic outlook were China’s September Retail Sales, marking a 5.5% YoY growth, and its Industrial Production registering at 4.5% YoY.
Nevertheless, market confidence is somewhat tempered due to concerns regarding a potential default by Country Garden Holdings, China’s leading private property developer, concerning its $11 billion offshore debt. Additionally, the ongoing military strife between Hamas and Israel remains a substantial risk factor, lending to gold’s appeal as a secure asset.
Tragically, the recent airstrike in Gaza, which led to the loss of over 500 lives, including women and children, has garnered global attention. UN Secretary-General António Guterres has since called for an immediate humanitarian ceasefire. This backdrop of global instability supports the continued relevance of gold as a safe-haven asset.
Amid these developments, the US Dollar, while demonstrating resilience, has faced challenges in fully capitalizing on its safe-haven status. This has been influenced by recent statements from Federal Reserve officials suggesting a potential pause in interest rate hikes this November.
Previous Tuesday’s data did offer a momentary boost to the US Dollar, with the US Retail Sales report showing an inflation-unadjusted rise of 0.7%. Further aiding the Dollar was the US’s decision to restrict Nvidia sales to China. However, any gains were short-lived following Richmond Fed President Thomas Barkin’s commentary on the restrictive nature of current policies.
In the coming days, remarks from Federal Reserve officials, coupled with the release of the Fed’s Beige Book, are expected to offer fresh insights into the central bank’s future strategies. This, combined with other US economic indicators and corporate earnings outcomes, will undoubtedly influence gold trading. The unfolding geopolitical situation in the Middle East remains a critical factor to monitor.
