Gold Settles Firmly Above Mid-1800.00 Round Mark Supported By Increased Safe-Haven Demand Due To Escalating Middle-East War
Key Takeaways:
- Gold (XAU/USD) ticked slightly higher on Tuesday to mark the third day of a positive move in the last five
- Rising geopolitical risks and market uncertainty boost gold's safe-haven appeal and help exert upward pressure on the XAU/USD cross
- Gold continues to face heavy headwinds stemming from rising U.S. Treasury yields bolstered by hawkish Fed expectations, which might help limit further XAU/USD gains
Gold (XAU/USD) ticked slightly higher on Tuesday to mark the third day of a positive move in the last five and settle firmly above the mid-1800.00 mark, supported by the ongoing Middle-East War, which has seen investors shy away from risk-perceived assets in favor of safe-haven assets, which in turn was seen as a key factor that helped exert upward pressure on gold prices.
At dawn on Saturday, during a major Jewish holiday, the Palestinian militant group Hamas launched a surprise attack on Israel in the country's deadliest day of violence for 50 years. In response, Israel launched airstrikes on Gaza and declared war against the Palestinian enclave of Gaza on Sunday. On Monday, as Hamas rockets continued to rain on Israel's largest city, Tel Aviv and Prime Minister Benjamin Netanyahu vowed to "change the Middle East" with Israel's war against the Palestinian militant group.
At the time of writing, the number of Israelis killed so far has risen to 1300, while the casualties on the Palestinian side are unknown. Still, last time we checked, they stood at 313, according to a report by the Palestinian Health Ministry.
The gold rally now would depend on how far the crisis expands to impact oil and other global markets, and if the crisis extends for a longer duration, then we could see an increased demand for safe-haven assets, which would help push the gold price higher. That said, the precious yellow metal continues to face heavy headwinds stemming from rising U.S. Treasury yields bolstered by hawkish Fed expectations, which support the greenback and might help limit further gains around the XAU/USD cross.
Market expectations that the Fed will hike interest rates at least once before the end of the year were reaffirmed after a U.S. monthly jobs data report, popularly known as Nonfarm Payrolls (NFP), released on Friday showed the U.S. economy created 336K jobs in September 2023, well above an upwardly revised 227K in August and beating market forecasts of 170K.
The better-than-expected NFP report comes on the heels of a string of data in the past few weeks suggesting the Fed will likely stick to a hawkish stance during the November or December meeting. Additionally, the upbeat U.S. Jobs report comes on the back of a slew of hawkish comments by top Fed officials, which remain supportive of rising U.S. Treasury yields and suggest the path of least resistance for the XAU/USD pair is to the upside.
As we advance, investors look forward to a slew of speeches by key Fed officials today that will provide clues on future monetary policy. The speeches of Fed officials will influence the U.S. dollar and provide short-term trading opportunities around the XAU/USD pair. The focus, however, remains on the release of the FOMC Meeting minutes on Wednesday, followed by the Consumer Price Inflation (CPI) data report on Thursday.
Technical Outlook: One-Day Gold Price Chart
From a technical perspective, the XAU/USD (gold) pair has extended the sharp pullback from the vicinity of the 1810.777 level touched on Friday but remains under heavy bearish pressure, and any subsequent move up could still be seen as a selling opportunity. The clean break below the 1884.97 (P) level in late September validated the bearish outlook and supported the case for further selling around the XAU/USD cross.
On the flip side, if dip-sellers and tactical traders jump back in and trigger a bearish reversal, initial support appears at the 1810.03 level (S1). On further weakness, the focus shifts lower to the 1804.38 level (S2), and in dire cases, the XAU/USD cross could extend a leg toward the 1800.00 round mark.
