Gold prices have been slipping for six days in a row, influenced by reduced expectations of a significant rate cut by the Federal Reserve. The situation between Hezbollah and Israel, which may lead to a ceasefire, has also lessened demand for gold as a safe-haven asset.
On Tuesday, gold prices dropped by nearly 1.5% during the day, hitting a three-week low. However, they found some support before reaching the key $2,600 level. Meanwhile, the US dollar is hovering near a seven-week high due to fading chances of a large interest rate cut from the Fed, further reducing demand for gold. The possible ceasefire news between Hezbollah and Israel added to the pressure, dragging prices below the $2,630 support level.
The decline in gold prices slowed near $2,600 as traders awaited the release of the Federal Open Market Committee (FOMC) meeting minutes later on Wednesday. Additionally, key US inflation data—like the Consumer Price Index (CPI) and Producer Price Index (PPI) coming out Thursday and Friday—will be critical for shaping expectations around interest rate moves, potentially influencing the next price direction for gold. In the meantime, the lack of significant movement in the US dollar might prevent further bearish moves in gold.
The gold market has been under pressure due to the declining odds of a 50-basis point rate cut by the Fed in November. The US dollar remains steady near recent highs, and according to the CME Group’s Fed-Watch Tool, there’s an 85% likelihood of a smaller, 25-basis point rate cut in November and a potential 50 bps cut by year-end. Fed officials, like New York Fed President John Williams and Fed Governor Adriana Kugler, have indicated that future rate decisions will be guided by incoming economic data, hinting that further cuts are possible if inflation continues to cool. Despite some progress, inflation is still a concern, as noted by Boston Fed President Susan Collins, while Fed Vice Chair Philip Jefferson highlighted ongoing economic growth and easing inflation.
The yield on the benchmark 10-year US bond remains above 4%, putting pressure on gold, which doesn’t offer interest or dividends. On the geopolitical side, Iran-backed Hezbollah signaled a potential ceasefire on Tuesday, reducing concerns over conflict on the Lebanon-Israel border, which has also weighed on gold’s appeal. Looking ahead, traders are watching for further developments from the FOMC minutes and upcoming US inflation reports for clues on the Fed’s rate path.
On the technical side, gold’s drop below $2,630 signals a bearish breakdown in the short-term trading range. However, technical indicators suggest a cautious approach, as confirmation of further declines is needed. A sustained move below $2,600 could push prices towards $2,560 and possibly the $2,530-$2,500 range. On the upside, a rebound past the $2,630-2,635 level could offer selling opportunities, with resistance likely around $2,657-2,658. A break above $2,670 could lead to a retest of September’s all-time highs around $2,685-2,686 and possibly challenge the $2,700 level.
