Gold clings to against amid high US Treasury yields

• Gold price steadied at $2,660 after hitting a record high of $2,670.
• Traders assign a 60% chance for another 50 bps of Fed rate cuts in November.
• US Treasury yields and a stronger US Dollar limited Gold’s upside despite bullish momentum.

Gold price remains steadily above $2,650 for the second straight session on Wednesdayas traders increased the odds for another big interest rate cut by the Federal Reserve (Fed) at the upcoming November meeting. That and high US Treasury yields kept the XAU/USD from rising further, and it mostly traded near $2,660, up 0.14%.

Market sentiment shifted slightly sour during the US session as Wall Street traded in the red. Hence, Bullion prices hit a record high of $2,670 but retreated as US Treasury yields rose four and a half basis points (bps) to 3.775%.

In the meantime, the US Dollar Index (DXY), which tracks the buck’s value against another six currencies, bounced off a 14-month low and edged up 0.54% to 100.88.

During the week, US economic data showed that business activity in the manufacturing sector cooled while services remained resilient. However, a deterioration in Consumer Confidence via the Conference Board (CB) suggests that conditions in the labor market could be worse than projected.

Last week, the Fed lowered borrowing costs by 50 bps to 4.75%-5.00%, and traders seemed confident about back-to-back cuts of the same size. According to the CME FedWatch Tool, the odds for a 50 bps Fed cut are 60%, while 25 bps stands at 40%.

Bullion prices had risen 29% in 2024, sponsored by Gold’s physical demand and major central banks beginning their easing cycles. This and geopolitical tensions could keep traders setting their sights at $2,700.

Bullion has risen over 29% so far in 2024, with gains attributed to central bank easing and geopolitical issues.

Daily digest market movers: Gold price stays firm amid high US yields

• Gold price is capped by US Treasury bond yields.
• Tensions in the Middle East between Israel and Hezbollah underpin Gold prices.
• An uneventful US economic schedule on Wednesday left traders adrift to past data while they prepared for Fed Chair Jerome Powell’s speech on Thursday.
• ETF flows, geopolitical tensions across the Middle East and China’s massive stimulus measures could drive Gold prices higher.
• According to the World Gold Council, global physically-backed Gold ETFs saw modest net inflows of 3 metric tons last week.

XAU/USD technical outlook: Gold price consolidates around $2,650-$2,660

Gold prices are set to extend the gains. However, price action turned sideways on Wednesday amid the lack of catalysts, which could push XAU/USD above its current record high toward $2,700.

From a momentum standpoint, the Relative Strength Index (RSI) signals that Gold is overbought, which could cause a leg-down before the rally resumes.

If XAU/USD extends its rally past the current year-to-date (YTD) peak of $2,670, look for a challenge of $2,675, followed by $2,700. Up next would be the $2,750 level, followed by $2,800.

On the flip side, if XAU/USD drops below $2,650, look for a test of the September 18 daily high at $2,600. The following key support levels to test will be the September 18 low of $2,546, followed by the 50-day Simple Moving Average (SMA) at $2,488.