Gold Price Overview:
– Current Trends: Gold price is trading near its recent record high of $2,686, but buyers have paused ahead of the US PCE Price Index data release. The yellow metal remains range-bound during the early Asian session as traders consolidate weekly gains and brace for the economic data that could influence the Fed’s interest rate outlook.
– Key Influences:
– US Dollar and Treasury Yields: The US Dollar has recovered from an early dip, despite muted US Treasury bond yields. The fading expectations for an outsized 50 basis points (bps) rate cut by the Federal Reserve in November have helped the USD regain some strength, putting pressure on Gold’s rally.
– Core PCE Data Looming: The core PCE Price Index, the Fed’s preferred measure of inflation, is expected to be released later today. If the core PCE inflation data comes in higher than expected, it could diminish expectations for a November rate cut, further strengthening the USD and potentially triggering a Gold price correction.
– Overbought Conditions: Gold is currently in overbought territory, according to technical indicators like the 14-day Relative Strength Index (RSI), which suggests that a correction may be imminent.
Market Movers and Sentiment:
– Dovish Fed Commentary: Fed Governor Lisa Cook’s dovish remarks and recent risk-on sentiment due to new Chinese stimulus measures have helped limit Gold’s downside despite the stronger USD.
– Quarter-End Flows: Month-end and quarter-end portfolio adjustments could contribute to increased volatility in the markets, with potential profit-taking in Gold ahead of next week’s high-impact US Nonfarm Payrolls data.
– Geopolitical Risks: Lingering geopolitical concerns continue to support the safe-haven demand for Gold, limiting its downside potential.
Technical Outlook:
– Overbought RSI: The 14-day RSI currently trades above the 76 level, indicating overbought conditions and cautioning buyers against further aggressive positioning.
– Upside Potential: If buyers regain control and break above the recent record high of $2,686, the next resistance level to watch will be the psychological $2,700 mark, followed by $2,750.
– Downside Risks: In the event of a correction, initial support is seen near the September 24 low of $2,623, followed by the key $2,600 level. A break below $2,600 could open the door for further declines toward the September 20 low of $2,585.
Conclusion:
Gold’s price remains supported near all-time highs, but caution is warranted due to overbought technical conditions and the upcoming US core PCE data, which could drive volatility. A hotter-than-expected inflation reading could lead to USD strength and trigger a Gold price correction. Conversely, a downside surprise in the inflation report could reinforce dovish Fed expectations, paving the way for further gains in Gold. Traders should also remain mindful of month- and quarter-end flows, which could influence price action.
