Gold Price Sticks to Modest Gains Near Record Peak Bullish Potential Intact
Gold price continues to hold its ground near the all-time peak, maintaining modest intraday gains, with bullish potential seeming intact. A combination of factors, including anticipated rate cuts by major central banks and heightened geopolitical risks, are driving flows toward the precious metal. Despite the recent rally in the US Dollar, which has reached its highest level since August, gold bulls appear to be largely unaffected.
Gold Price Retests All-Time Peak Amid Geopolitical Risks
Gold price (XAU/USD) witnessed sustained buying momentum for the third consecutive day on Thursday, retesting its all-time high near the $2,685 mark during the Asian session. Several fundamental factors continue to support the yellow metal, with expected interest rate cuts by major central banks and escalating geopolitical tensions in the Middle East being the primary drivers.
As conflicts in the Middle East intensify, the demand for gold as a safe-haven asset has surged. Investors are increasingly turning to gold to hedge against geopolitical uncertainty, making it a favored choice in these turbulent times. Non-yielding gold also benefits from expectations that central banks will cut interest rates, further enhancing its appeal.
XAU/USD Daily Price Chart
Source: TradingView, prepared by Richard Miles
The Impact of Interest Rate Cuts on Gold Prices
One of the key factors boosting the gold price is the growing likelihood of rate cuts by major central banks. The Federal Reserve, European Central Bank (ECB), and Bank of England are expected to ease their monetary policies in the coming months, which would decrease bond yields and support the demand for non-interest-bearing assets like gold.
The US Dollar has remained firm, trading near its highest level since early August, reflecting market expectations that the Federal Reserve will implement modest rate cuts over the next year. Despite this, gold has held steady, as the safe-haven demand for the metal offsets the strong dollar. This indicates that gold bulls are resilient and remain confident in the metal’s long-term prospects.
Daily Digest Market Movers: Key Factors Supporting Gold Prices
Several market-moving events and factors are currently influencing gold prices, including interest rate cuts, geopolitical risks, and the performance of crude oil prices.
Geopolitical Risks and Safe-Haven Demand
Geopolitical tensions, especially in the Middle East, are driving safe-haven demand for gold. The ongoing conflict between Israel and Iran, alongside broader instability in the region, continues to push investors toward safer assets like gold. Recent developments, such as Israel’s plan to respond to Iran’s attack, have raised concerns about further escalation and the potential for a full-scale war, prompting increased interest in gold.
The United Nations has also reported that Israeli forces fired at its peacekeeping position in southern Lebanon, injuring multiple troops and further fueling concerns about geopolitical instability in the region. This heightened risk environment supports gold’s safe-haven appeal.
Rate Cut Bets and Inflationary Pressures
The recent decline in crude oil prices is expected to ease inflationary pressures, paving the way for central banks to cut interest rates further. This has reinforced expectations that central banks will adopt more accommodative monetary policies, which, in turn, supports the demand for gold. Lower interest rates typically reduce the opportunity cost of holding non-yielding assets, making gold more attractive to investors.
The ECB is expected to announce its third rate cut of the year, while a sharp decline in UK inflation has bolstered expectations for a rate cut by the Bank of England in November. The CME Group’s FedWatch Tool indicates a 90% probability that the Federal Reserve will lower interest rates by 25 basis points next month, which has driven US bond yields to a one-week low. These developments have contributed to the bullish sentiment surrounding gold.
Central Bank Buying and Strategic Reserve Diversification
Central banks continue to play a significant role in supporting gold prices. Officials from the London Bullion Market Association (LBMA) have confirmed that central banks are keen buyers of gold as they seek to diversify their reserves for financial and strategic reasons. This sustained buying activity has provided additional upward pressure on gold prices and reinforces the bullish outlook.
Technical Outlook: Gold Bulls Await Break Above $2,700
From a technical perspective, gold is approaching a critical level, with the $2,700 mark serving as a key resistance point. A sustained move beyond this level could act as a fresh trigger for bullish traders, paving the way for an extension of the ongoing uptrend, which has been in place for several months.
Oscillators Signal Positive Momentum
The oscillators on the daily chart are currently in positive territory, further supporting the constructive outlook for gold. Importantly, these oscillators are not yet in the overbought zone, indicating that there is still room for further upside movement. This suggests that the gold price could continue its ascent in the near term.
Key Support and Resistance Levels
On the downside, the immediate support for gold is located in the $2,662-$2,660 range, followed by the $2,647-$2,646 area. A break below these levels could trigger some technical selling, potentially dragging the gold price down to intermediate support around $2,630. However, as long as the price holds above these key support zones, the overall bullish trend is likely to remain intact.
Upcoming Economic Data and Events
Looking ahead, traders will be closely monitoring several important economic events that could influence gold prices in the short term. The US economic docket includes key data releases such as Retail Sales, Weekly Initial Jobless Claims, and the Philly Fed Manufacturing Index. These reports will provide insights into the health of the US economy and could impact the US Dollar and gold prices.
Additionally, the ECB’s monetary policy decision is expected to introduce volatility in the markets, which could provide short-term trading opportunities for gold investors. Any dovish signals from the ECB could further support gold’s bullish momentum.
Bullish Potential Remains Intact
In conclusion, gold prices remain supported by a combination of fundamental and technical factors. Geopolitical risks, expected interest rate cuts, and central bank buying are all contributing to the bullish outlook for gold. While the strong US Dollar has capped some of the gains, the overall trend remains positive, with a move beyond the $2,700 mark likely to spark fresh buying interest. Traders will be watching key support levels and upcoming economic data for additional short-term opportunities in the gold market.
