Gold (XAU/USD) struggles to capitalize on an intraday bounce from the vicinity of the $4,000 psychological mark and trades with a negative bias during the early European session on Thursday. The Israel-Hamas agreement to the first phase of the peace deal eases some of the geopolitical tensions and turns out to be a key factor undermining demand for the traditional safe-haven commodity. Furthermore, the emergence of some US Dollar (USD) dip-buying acts as a headwind for the precious metal, though dovish Federal Reserve (Fed) expectations could help limit deeper losses.
Traders have been pricing in a greater chance that the US central bank will lower borrowing costs two more this this year, in October and in December. This, along with concerns that a prolonged US government shutdown could affect the US economic performance, might keep a lid on any further USD appreciation and offer some support to the non-yielding Gold. Hence, it will be prudent to wait for strong follow-through selling before confirming that the bullion has topped out and positioning for any meaningful corrective slide from the all-time peak touched on Wednesday.
Daily Digest Market Movers: Gold bulls pause for a breather amid firmer USD, fading safe-haven demand
- US President Donald Trump said Wednesday that Israel and Hamas had agreed on the first phase of his 20-point Gaza peace plan after talks in Egypt. The development prompts bullish traders to take some profits off the table and weighs on the safe-haven Gold during the Asian session on Thursday.
- Minutes from the Federal Reserve’s September meeting released on Wednesday indicated near unanimity among participants to lower interest rates amid concern about labour market risks. Policymakers, however, remained split on whether there should be one or two more rate reductions before the year-end.
- According to the CME FedWatch tool, the possibility of a 25-basis-point interest rate cut by the Fed in October and December stands at around 93% and 79%, respectively. Moreover, the US government shutdown enters its ninth day, which keeps a lid on the US Dollar and acts as a tailwind for the commodity.
- The Senate, once again, failed to advance funding bills to end the government shutdown for the sixth time on Wednesday amid few signs of progress towards a deal as Democrats and Republicans traded blame for the impasse. Moreover, furloughing of federal workers presents risks for the US labor market.
- A senior Russian lawmaker warned on Wednesday that Moscow will shoot down Tomahawk cruise missiles and bomb their launch sites if the United States decides to supply them to Ukraine. This keeps geopolitical risks in play and should contribute to limiting the corrective slide for the precious metal.
- In the absence of any relevant market-moving economic releases on the back of the US government closure, traders will closely scrutinize Fed Chair Jerome Powell’s remarks for cues about the rate-cut path. This will play a key role in influencing the USD and providing a fresh impetus to the XAU/USD pair.
Gold corrective pullback could be seen as a buying opportunity; $4,000 holds the key for bulls
From a technical perspective, the Gold price shows resilience below a one-week-old ascending channel support and bounces off the vicinity of the $4,000 psychological mark. Hence, it will be prudent to wait for a sustained break and acceptance below the said handle before positioning for some meaningful corrective decline. The XAU/USD pair might then decline to the next relevant support near the $3,948-3,947 region before eventually dropping to the $3,900 round figure.
On the flip side, momentum back above the $4,035-4,036 region could lift the Gold price beyond the all-time peak, around the $4,059-4,060 area touched on Wednesday, towards testing the ascending channel resistance, currently around the $4,080 zone. Some follow-through buying, leading to a subsequent strength beyond the $4,100 mark, will be seen as a fresh trigger for the XAU/USD bulls and set the stage for an extension of the recent well-established uptrend.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.90% | 0.60% | 2.39% | 0.02% | 0.10% | 0.83% | 0.79% | |
| EUR | -0.90% | -0.40% | 1.39% | -0.91% | -0.84% | -0.10% | -0.14% | |
| GBP | -0.60% | 0.40% | 1.88% | -0.51% | -0.44% | 0.30% | 0.26% | |
| JPY | -2.39% | -1.39% | -1.88% | -2.26% | -2.28% | -1.58% | -1.60% | |
| CAD | -0.02% | 0.91% | 0.51% | 2.26% | 0.14% | 0.82% | 0.77% | |
| AUD | -0.10% | 0.84% | 0.44% | 2.28% | -0.14% | 0.75% | 0.69% | |
| NZD | -0.83% | 0.10% | -0.30% | 1.58% | -0.82% | -0.75% | -0.04% | |
| CHF | -0.79% | 0.14% | -0.26% | 1.60% | -0.77% | -0.69% | 0.04% |
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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
