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Gold (XAU/USD) Prices Hold Above $2600/oz.. Will US CPI Lead a Recovery in Price?

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  • Gold prices are consolidating above $2600/oz, supported by uncertainty in the Middle East.
  • Upcoming US CPI data will impact gold prices, with a softer print potentially boosting gold and a higher print strengthening the USD.
  • Technically, gold is rangebound, with immediate resistance at 2624 and support at 2600. The geopolitical situation and CPI data will likely provide short-term clarity.

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Gold prices consolidated in early European trade following another attempted push toward the $2600/oz handle yesterday. For now though, bears have been unable to sustainably push the precious metal price below the $2600/oz handle. 

As discussed in my Gold Piece earlier this week, the precious metal continues to find support on the uncertainty in the Middle East. Concern continues to shift back and forth as markets await a potential Israeli response to Iran, The fear that a wider regional war may breakout has resulted in safe haven demand and Gold continues to benefit.

The longer term picture for Gold also favors the bulls, however, the aggressive nature of the rally from the mid 2500’s means a pullback has been sorely needed. 

The US Dollar and Dollar Index have been enjoying a stellar run of late but could it be time for a pullback or potential midweek reversal?

As things stand, markets are now pricing in just a 74% chance of a 25 bps cut in November, this is down from 80% yesterday. The FED minutes release last night played a role in this change as it was revealed that quite a few policymakers were skeptical about a 50 bps cut in September. The fact that some policymakers were concerned in September, the recent jobs report is only going to further strengthen their resolve at the November meeting. 

Source: CME FedWatch Tool

Economic Data Ahead – US CPI the Catalyst?

US CPI will be released shortly and any signs of an uptick in inflation could add fuel to the USD fire. This in turn could weigh on Gold prices as it would have an impact on rate cut expectations as well. 

Gold bulls on other hand will be eyeing a softer CPI print, preferably below estimates to take some steam out of the USD rally. This would also work in favor of higher Gold prices. 

Barring such a development, the only other saving grace for Gold bulls could come in the form of an Israeli attack on Iran. As the fighting rages on between Hezbollah and the IDF on the Israeli-Lebanon border, the risk premium has largely remained constant. The re-emergence of the Iran-Israel dynamic however is sure to result in some safe haven demand and thus higher prices for the precious metal. 

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Technical Analysis Gold (XAU/USD)

From a technical analysis standpoint, Gold prices have been rangebound since breaking below the 2624 handle on Tuesday. Since then the precious metal has made a push for the 2600 psychological level but bears have yet to take control.

All the technical aspects point to further downside but the overarching geopolitical narrative is what is keeping buyers in play.

As the CPI approaches, it could well prove to be the catalyst the precious metal needs for some short-term clarity. Immediate resistance rests at the 2624 handle before the 100-day MA at 2634 comes into focus.

Conversely a push lower from here first needs to find acceptance below the 2600 handle. If this fails to materialize than any brief push below 2600 is likely to face significant buying pressure.

GOLD (XAU/USD) Four-Hour (H4) Chart, October 10, 2024

Source: TradingView (click to enlarge)

Support

  • 2600
  • 2591
  • 2577 (200-day MA)

Resistance

  • 2624
  • 2634
  • 2650

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Zain Vawda

Zain Vawda

Market Analyst at OANDA
Zain is an experienced financial markets analyst and educator with a rich tapestry of experience in the world of retail forex, economics, and market analysis. Initially starting out in a sales and business development role, his passion for economics and technical analysis propelled him towards a career as an analyst.

He has spent the last 3 years in an analyst role honing his skills across various financial domains, including technical analysis, economic data interpretation, price action strategies, and analyzing the geopolitical impacts on global markets. Currently, Zain is advancing in obtaining his Capital Markets & Security Analyst (CMSA) designation through the Corporate Finance Institute (CFI), where he has completed modules in fixed income fundamentals, portfolio management fundamentals, equity market fundamentals, introduction to capital markets, and derivative fundamentals.

He is also a regular guest on radio and television programs in South Africa, providing insight into global markets and the economy. Additionally, he has contributed to the development of a financial markets course approved by BankSeta (Banking Sector Education and Training Authority) at NQF level 6 in South Africa.
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