After last week's weaker than expected US employment report, precious metals rose by nearly $15 in just a few minutes. Due to the fact that the US economy added 150000 jobs in October, compared to the forecast of 180000, and the low revision of data in previous months, there is speculation that the Federal Reserve will not further raise interest rates.
Although there is increasing hope that the Federal Reserve will no longer raise interest rates, which is good news for zero yield gold, it has also boosted overall risk sentiment - as investors purchase riskier assets, it limits the upward returns on gold prices.
Nevertheless, since the Hamas attack on Israel, gold prices have risen by more than 8%, hovering around the psychological level of $2000. Taking a quick look at the technical side, prices are bullish on the weekly chart, but the Relative Strength Index (RSI) is slowly approaching an overbought situation.
Narrowing down the monthly chart, prices are still within a very wide range, with a key resistance level of $2000 and a support level of $1800.
Although the risk calendar is much quieter this week, some events may affect gold prices in the coming days:
1. Fed Speech+Powell
This week was filled with speeches from numerous Fed spokespersons, including Thursday's Fed Chairman Powell.
Investors will seek new clues about the Fed's interest rate path, especially considering that the Fed has not completely ruled out the possibility of future interest rate hikes. Although Powell hinted that the Federal Reserve would complete interest rate hikes, he also warned that there is still much work to be done on inflation.
After the employment report was released last Friday, the likelihood of the Federal Reserve raising interest rates in December is only 10%. Interestingly, traders have fully digested the impact of the interest rate cut in June 2024.
If Powell and his colleagues adopt a dovish tone and suggest that the Federal Reserve will end interest rate hikes, gold prices may slightly rise. However, if these statements support risk sentiment, the increase may be limited.
Any unexpected hawkish hint in the speech of the Federal Reserve will trigger a rebound in the yield of the dollar and treasury bond bonds, which may drag the gold price away from the psychological level of $2000.
2. Geopolitical risks
The ongoing tension in the Middle East remains a major factor in global market uncertainty.
If concerns about the potential spillover effects of the conflict between Israel and Hamas intensify, it may trigger a new round of risk aversion, prompting investors to turn to safe haven destinations such as gold. Not only the developments in the Middle East, but also the Russia Ukraine crisis may raise concerns about the global economic recession. Although the focus seems to have shifted back to interest rates, geopolitics may play a role in shaping the outlook for gold.
If tensions in the Middle East dampen risk sentiment, this may provide space for gold prices to rise. Any new signs of easing geopolitical tensions could boost overall risk sentiment, thereby dragging down gold prices.
3. Technical strength: Breakthrough?
There seems to be a fierce tug of war around $2000, with bulls and bears vying for control.
The power scale on the daily chart swings in favor of bulls, and technical indicators show further increases. Prices are above the daily moving averages of 50, 100, and 200. However, the Relative Strength Index (RSI) indicates that prices are overbought within the daily time range.
Key support is around $1968, resistance is around $2010, but the key level is still $2000.
A strong daily closing price above $2000 may lay the foundation for bulls to set targets of $2010 and $2018 respectively.
If the price is still limited below $2000, it may trigger a drop to $1968 and $1945.
Currently, Bloomberg's foreign exchange model shows a 76% probability of gold trading between $1956.63 and $2024.73 this week.
