This decrease follows a Rs500 drop on Monday, where the price settled at Rs275,500.
Internationally, gold prices also decreased on Tuesday, with the rate reported at $2,647 per ounce (including a premium of $20), marking a $6 decline during the day.
Silver prices remained unchanged at Rs3,050 per tola.
Last week, gold prices reached a record high of Rs277,000 per tola in Pakistan. Experts have linked the recent surge in gold prices to various global factors, including rising geopolitical tensions in the Middle East, anticipated Federal Reserve rate cuts, and increased demand from major markets such as China and India.
Gold (XAU/USD) has shown a slight recovery, trading in the $2,640s per troy ounce on Tuesday, following heightened geopolitical tensions after the Israeli army’s ground invasion of Lebanon. This situation has driven safe-haven demand for gold, offsetting recent losses that occurred over the past two days. The prior week’s boost from China’s stimulus program, which momentarily shifted capital back into property and led to a rally in Chinese equity markets, has now faded, allowing gold to recover some ground.
FACTORS INFLUENCING GOLD PRICES
Federal Reserve Commentary:
Despite this recovery, gold’s upside may be limited due to comments from Federal Reserve Chairman Jerome Powell. During his speech at the NABE conference, Powell emphasized that the larger-than-standard 50 basis points (bps) rate cut at the last meeting does not guarantee similar actions in the future. He indicated that the Federal Open Market Committee (FOMC) is not in a rush to cut rates quickly, suggesting that while there may be two more 25 bps cuts before the year-end, the Fed is not on a predetermined course.
As a result, market expectations for a 50 bps cut at the Fed’s upcoming November meeting have dropped from over 60%last week to around 30% as of Tuesday, according to the CME FedWatch tool. Additionally, stronger-than-expected economic data has dampened speculation for any substantial rate cuts, which negatively impacts gold prices. As a non-interest-bearing asset, gold becomes more attractive when interest rates are lower; conversely, higher or stable rates tend to weigh on gold prices.
TECHNICAL ANALYSIS
Gold has recently pulled back to the 50-period Simple Moving Average (SMA) on the 4-hour chart, displaying a sequence of lower lows and lower highs since reaching an all-time high on September 26. This correction raises concerns about the short-term uptrend of the precious metal.
- Support Levels: Should the price dip below $2,625 (the low from Monday), it may signal further bearish movement, potentially leading gold down to the trendline support at around $2,615-$2,620. A break below this trendline could see gold testing firmer support at $2,600 (the high from September 18), followed by further levels at $2,550 and $2,544 (which represents the 0.382 Fibonacci retracement of the September rally).
- Relative Strength Index (RSI): The RSI indicator remains in neutral territory, indicating there may be room for further downside before the asset becomes oversold.
MEDIUM TO LONG-TERM OUTLOOK
Despite the short-term corrections, gold maintains a medium to long-term uptrend. The foundational principle of technical analysis supports the notion that “the trend is your friend,” suggesting that the likelihood of a resumption of upward momentum remains favorable. A decisive break above the recent all-time high of $2,685 would confirm a bullish continuation, with potential targets at $2,700 and $2,750.
In summary, while gold is currently facing short-term pressures from geopolitical tensions and Fed commentary, its long-term outlook remains optimistic as investors anticipate potential upward movements should the market conditions favor safe-haven assets.
