Gold prices (XAU/USD) remain subdued as the European session approaches on Monday, staying just below the recent record high despite a lack of strong selling pressure. Investor interest in riskier assets is being bolstered by China’s latest stimulus measures, providing some underlying support for the precious metal. However, concerns over heightened geopolitical risks in the Middle East are keeping a floor under gold’s price.
Additionally, expectations of a possible 50 basis point interest rate cut by the Federal Reserve in November are also supporting gold’s appeal. Meanwhile, the US Dollar is trading in a narrow range, holding above its lowest level since July 2023, suggesting a limited downside for XAU/USD and the potential for further gains. Traders now await remarks from Fed Chair Jerome Powell for more direction.
MARKET OVERVIEW: GOLD TRADERS CAUTIOUS AMID MIXED SIGNALS
Tensions in the Middle East escalated over the weekend as Israel expanded its operations, targeting Iranian-backed groups in Yemen and Lebanon. Israel’s aerial strikes hit key infrastructure in Yemen and claimed the life of a senior Hezbollah figure in Lebanon. These developments have intensified fears of a broader conflict involving Iran and the U.S., which could increase demand for safe-haven assets like gold.
Market participants are also closely watching for any dovish signals from the Federal Reserve. There is growing speculation that the central bank could cut rates by 50 basis points at its November meeting. This sentiment is keeping the US Dollar under pressure, limiting its recovery and providing a cushion for gold prices. Comments from St. Louis Fed President Alberto Musalem, who indicated the Fed might gradually reduce rates following a larger cut in September, have further reinforced this outlook.
The broader market sentiment received a boost after China’s central bank announced new measures, including cuts to mortgage rates, aimed at supporting the housing market. This follows a series of stimulus efforts last week, marking China’s most significant economic support package since the pandemic.
Despite these positive developments, China’s economic data presents a mixed picture. While the official Manufacturing PMI improved in September, the Caixin Manufacturing and Services PMIs both contracted, reflecting ongoing challenges in the broader economy.
XAU/USD TECHNICAL ANALYSIS
From a technical standpoint, gold is likely to find support near the $2,625 level, which coincides with the upper boundary of a short-term ascending channel. If this support fails, the next significant level to watch is $2,600, which could trigger further declines toward $2,560 and $2,530 if breached.
On the upside, resistance is expected around the $2,670-2,671 range, followed by the $2,685-2,686 zone, near the recent record high. A break above $2,700 could set the stage for a continuation of the long-term bullish trend.
