Gold gains on safe-haven status amid geopolitical uncertainty

  • Gold reaches a new ATH at $2,790, bolstered by election uncertainty and steady US economic growth.
  • US Q3 GDP and ADP jobs data show economic resilience, caps Gold’s gains as Treasury yields slip.
  • Year-to-date, Bullion prices had surged over 35%, analysts project further gains, potentially hitting $3,000 by 2025.

Gold price soared to a record high of $2,790 during the North American session, as investors remain uncertain about the outcome of the US Presidential Elections. Upbeat economic data in the US put a lid on the precious metal advance, as the economy grew steadily while the jobs market remained robust.

The XAU/USD trades at $2,785, gains over 0.40%, and is slightly below the all-time high (ATH) after the yellow metal bounced off daily lows of $2,771. US Treasury bond yields disappointed during the session as investors’ confidence improved that the Fed would achieve its soft-landing scenario.

Data from the United States (US) showed the economy continued to grow steadily while the labor market remained robust. The Gross Domestic Product (GDP) for the third quarter of 2024 dipped below estimates. The ADP Employment Change report for October showed that private companies hired more personnel than foreseen.

At the same time, US Pending Home Sales soared due to buyers taking advantage of the combination of lower mortgage rates and more inventory choices, commented Lawrence Yun, Chief Economist of the National Association of Realtors (NAR).

The US election is reaching its boiling point as we approach November 5, Super Tuesday. The Democratic Vice-President Kamala Harris and former President Donald Trump clash in a tight race, as polls showed.

So far, Bullion’s price has surged over 35%, its most significant gain in twelve months, and is on its way to its best yearly performance since 1979. Sources cited by Reuters commented that Gold may reach $3,000 by 2025 due to “emerging market concerns, gold ETF inflows, and post-election market adjustments.”

Gold remains supported by safe-haven flows amid the ongoing conflict in the Middle East, even though Israeli officials commented that Hezbollah is ready to distance itself from Hamas in Gaza, and the IDF is close to finishing its ground operations.

Daily digest market movers: Gold price prolongs its positive streak

  • The US Dollar Index (DXY), which tracks the Dollar’s value against a basket of six currencies, drops 0.18% at 104.08.
  • The ADP National Employment Change for October rose by 233K, surpassing estimates of 115K and the September figure of 159K.
  • The US Bureau of Economic Analysis (BEA) reported that the US economy grew by 2.8% quarter-over-quarter (QoQ) in the third quarter of 2024, below the Q2 final reading and estimates of 3%.
  • Pending Home Sales in September expanded by 7.4% month-over-month (MoM), exceeding estimates and August’s figures. On an annual basis, sales grew by 2.6%, rebounding from August’s -3% contraction.
  • The Atlanta Fed GDP Now model suggests the economy grew by 2.8% in Q3 2024.
  • Data from the Chicago Board of Trade, via the December fed funds rate futures contract, shows investors estimate 49 bps of Fed easing by the end of the year.

XAU/USD Technical Outlook: Gold price rallies to an all-time peak of $2,790

Gold price uptrend remains intact, with the yellow metal hitting a record high at $2,790. A breach of the latter will expose the $2,800 figure, followed by the psychological levels of $2,850 and $2,900.

On the other hand, if sellers move in and push prices below $2,750, the next support would be $2,700. Up next the September 26 swing high, which turned support at $2,685, followed by the 50-day Simple Moving Average (SMA) at $2,603.

Momentum suggests the non-yielding metal could consolidate as the Relative Strength Index (RSI) remains bullish, aiming higher, breaking the last peak. This means that buyers are gathering steam.

Risk sentiment FAQs

In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.

 

Source: https://www.fxstreet.com/news/gold-surges-to-record-high-of-2-790-amid-us-election-uncertainty-safe-haven-flows-202410302120