Gold prices are struggling to gain any significant momentum, stuck in a familiar range. Reduced expectations for a 50 basis point rate cut by the Federal Reserve in November are putting pressure on the precious metal. However, ongoing geopolitical risks and a slight weakening of the US Dollar could help prevent further losses for the XAU/USD.
On Tuesday, during the Asian session, gold remained under pressure, hovering near the lower end of its short-term range. Investors are pulling back on hopes for an aggressive rate cut by the Fed, especially as the US labor market shows resilience. This has created a headwind for gold, which doesn’t generate any yield.
Meanwhile, the US Dollar has eased from its seven-week high as traders are in wait-and-see mode ahead of Wednesday’s Federal Open Market Committee (FOMC) meeting minutes. Later in the week, inflation data from the US – with the Consumer Price Index (CPI) on Thursday and the Producer Price Index (PPI) on Friday – will also be crucial in shaping expectations around the Fed’s next moves. In the meantime, geopolitical tensions in the Middle East continue to drive demand for safe-haven assets like gold, providing some support and potentially limiting any major downward moves. With these mixed factors at play, it might be wise to wait for a decisive move below the recent trading range before betting on a bigger decline for gold, which has been pulling back since hitting an all-time high on September 26.
Market Movers: Gold Range-Bound Amid Conflicting Signals
Last week’s strong US jobs report has cooled expectations of a big rate cut from the Fed, which has weighed on gold prices. According to the CME Fed-Watch tool, markets are now pricing in an 85% chance of a 25-basis-point rate cut in November. US bond yields are also rising, with the 10-year Treasury yield crossing the 4% mark for the first time in two months, adding pressure to gold.
On the Fed side, Minneapolis President Neel Kashkari highlighted that the focus has shifted from inflation to a potential rise in unemployment, while St. Louis Fed President Alberto Musalem expressed support for more rate cuts, contingent on economic performance.
On the geopolitical front, the ongoing conflict in the Middle East is a growing concern. Hezbollah has fired rockets into Israel, while Israel retaliated with bombings in Beirut, raising fears of a wider conflict. These tensions could continue to support gold prices as investors look for safe-haven assets.
In China, the National Development and Reform Commission (NDRC) signaled increasing downward pressure on the Chinese economy, further complicating the global economic outlook. Traders are now eagerly awaiting the FOMC minutes, as well as US inflation data later this week, to get more clarity on the Fed’s policy path.
Technical Outlook: Gold Holding Above Key Support Levels
From a technical standpoint, gold remains supported above the $2,632-$2,630 range, which marks the lower boundary of its current trading range. A break below this level could trigger selling pressure, potentially dragging prices down to the $2,600 mark or even lower to the $2,560 zone. A further decline could push gold towards the $2,530-$2,535 area, with $2,500 being the next psychological support.
On the upside, gold needs to clear the $2,670-$2,672 area to make a meaningful push higher. Beyond that, the next target would be the all-time high of $2,685-$2,686, with the $2,700 mark serving as a key psychological level for bulls. If prices break through these levels, it could fuel a continuation of gold’s longer-term uptrend.
