- Gold price ticks lower for the second straight day and is pressured by a combination of factors.
- Hawkish Fed expectations, elevated US bond yields and some USD buying weigh on the metal.
- Receding safe-haven demand further undermines the XAU/USD ahead of the FOMC meeting.
Gold price (XAU/USD) trades with a negative bias for the second successive day on Tuesday and remains below the $2,000 psychological mark heading into the European session. Expectations that the Federal Reserve (Fed) will stick to its hawkish stance to bring inflation back to its 2% target remain supportive of elevated US Treasury bond yields. This, in turn, helps revive the US Dollar (USD) demand and turns out to be a key factor weighing on the non-yielding yellow metal.
Apart from this, Israel’s more measured approach to its incursion into Gaza has eased fears about a broadening crisis in the Middle East and further undermines the safe-haven Gold price. That said, the risk of a further escalation in the Israel-Hamas conflict remains, which, along with the uncertainty over the economic recovery in China, lends some support to the XAU/USD. Furthermore, the lack of any follow-through selling warrants some caution before placing aggressive bearish bets.
Traders might also opt to remain on the sidelines ahead of a two-day FOMC monetary policy meeting, starting this Tuesday. The Fed is scheduled to announce its decision on Wednesday and is widely anticipated to hold interest rates steady in a range of 5.25%-5.50%, or the highest in 22 years. Investors will look for cues about the future rate-hike path, which, in turn, will play a key role in influencing the USD price dynamics and provide a fresh directional impetus to the Gold price.
Daily Digest Market Movers: Gold price dips amid easing geopolitical risks, traders await more Fed cues
- Gold price struggles to gain any meaningful traction and remains below a multi-month peak touched last week, though lacks follow-through selling.
- The precious metal remains on track for an 8% rise this month – the most since November 2022 – in the wake of safe-haven demand stemming from the Middle East crisis.
- Investors seem reluctant to place aggressive directional bets and look to the Federal Reserve’s near-term monetary policy outlook for a fresh impetus.
- The Fed is widely expected to keep interest rates steady at a 22-year high at the end of its two-day monetary policy meeting on October 31-November 1.
- The US economy remains resilient and inflation is still above the Fed’s 2% target level, which should allow the US central bank to stick to its hawkish stance.
- Fed Chair Jerome Powell had warned earlier this month that inflation was still too high and more rate increases are possible if the economy stays surprisingly hot.
- The Bank of Japan once again underdelivers and defies market expectations for a change to the 10-year JGB yield ceiling from 1% to perhaps 1.25% or 1.50%.
- Easing geopolitical tension in the Middle East dent demand for traditional safe-haven assets and also contributes to a mildly offered tone around the XAU/USD.
- China’s Manufacturing PMI shrinks and growth in the services sector slowed in October, fuelling concerns about the worsening conditions in the world’s second-largest economy.
Technical Analysis: Gold price manages to hold above the $1,985 resistance breakpoint turned support
From a technical perspective, the Relative Strength Index (RSI) on the daily chart has eased from overbought territory and supports prospects for the emergence of some dip-buying around the Gold price. Hence, any subsequent decline is more likely to find support near the $1,986-1,985 horizontal resistance breakpoint. A convincing break, however, might prompt some technical selling and drag the XAU/USD further towards the $1,964 intermediate support en route to last week’s swing low, around the $1,954-1,953 region.
On the flip side, the $2,000 round figure, followed by the multi-month top, around the $2,005 area touched last Friday, now seems to act as immediate hurdles. A sustained strength beyond should pave the way for an extension of a three-week-old bullish trend and lift the Gold price to the next relevant barrier near the $2,022 region.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.21% | 0.20% | 0.15% | 0.40% | 0.65% | 0.26% | 0.03% | |
| EUR | -0.22% | -0.02% | -0.03% | 0.18% | 0.43% | 0.04% | -0.18% | |
| GBP | -0.20% | 0.00% | -0.02% | 0.18% | 0.46% | 0.07% | -0.17% | |
| CAD | -0.17% | 0.08% | 0.04% | 0.25% | 0.51% | 0.11% | -0.12% | |
| AUD | -0.41% | -0.18% | -0.18% | -0.20% | 0.28% | -0.12% | -0.35% | |
| JPY | -0.64% | -0.45% | -0.46% | -0.51% | -0.27% | -0.38% | -0.62% | |
| NZD | -0.26% | -0.04% | -0.06% | -0.07% | 0.12% | 0.41% | -0.24% | |
| CHF | -0.04% | 0.18% | 0.16% | 0.12% | 0.35% | 0.62% | 0.23% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Source: https://www.fxstreet.com/news/gold-price-edges-lower-on-easing-middle-east-tensions-focus-remains-on-fomc-meeting-202310310442