Gold prices have retraced a small part of their big rise on Friday. The US Dollar continues to remain on the defensive. Investors are carefully watching the ongoing Israel-Hamas conflict and the new developments over the weekend. In this environment, US Treasury bond yields are rising, putting pressure on the shiny metal.
Gold prices, which rose with the flight to safety, experienced a slight decline
cryptokoin.comAs you followed from , gold made a great attack on Friday. The yellow metal became a symbol of escape to safety from geopolitical uncertainty over the weekend. Thus, it made a strong increase with a return to $100. Investors acted with the expectation that the ongoing Hamas-Israel war would maintain upside risks for gold prices. That’s why they decided to close their short positions. The shiny metal halted its gradual rise and gave back some of its gains on the first day of the week.
Additionally, a lack of demand for U.S. Treasuries due to concerns about rising deficits has boosted gold’s strength. Meanwhile, the recovery in the US Dollar stalled due to dovish Fed talks. This helped the rise in horse prices. Gold started the week paring its gains in a natural correction mode following Friday’s big move. The decline in the gold price occurred despite the underperformance of the US Dollar. However, it is also possible to attribute the decline in gold prices to the new rise in US Treasury bond yields.
As tensions increase, gold investors will watch these events
Investors are trying to digest the weekend’s developments regarding the conflicts in the Middle East. Therefore, they remain in a cautious mood. Israeli Prime Minister Benjamin Netanyahu vowed Sunday to “destroy Hamas” as his troops prepared to enter the Gaza Strip to pursue Hamas militants. Meanwhile, the United States and its allies are concerned about a possible Iranian intervention in the conflict. Therefore, they increased their efforts to control Hamas-Israel.
Geopolitical tensions in the Middle East continue to be supportive for gold prices for now. Looking ahead, US Dollar investors are awaiting US Retail Sales data and Fed statements for new upside support. Gold investors are eagerly awaiting Fed Chairman Jerome Powell’s speech at the Economic Club of New York this week for new information on the central bank’s interest rate outlook, especially after last week’s data showing the US CPI rose more than expected in September. According to the CME FedWatch tool, markets are almost certain that the Fed will pause interest rate hikes next month. However, he prices the possibility of a rate hike in December at 30%.
Technical analysis of gold prices: Correction is on the cards for now
Market analyst Dhwani Mehta portrays the technical outlook for gold as follows. The gold price surpassed all major Daily Moving Averages (DMA) on Friday. Thus, it made a weekly close above the critical 200 DMA at $1,929. The 14-day Relative Strength Index (RSI) indicator broke through the middle line and made a sharp rally towards the bullish zone. This justified the big move in gold prices.
However, gold buyers failed to stay above the 200 DMA barrier early on Monday. It then launched a fix. In doing so, gold prices breached the 100 DMA at $1,923. It is now headed to test the flat 50 DMA at $1,901 in case the reversal gains momentum.
The renewed downward trend is synchronized with the decline in the RSI indicator. If the 50 DMA fails to provide support for gold price, the pullback could extend towards the 21 DMA from $1,880. On the upside, the nearest resistance lies at the 100 DMA at $1,923. Also, on this one all eyes will be on the 200 DMA barrier at $1,929. Further above is a three-week high of $1,933. After this, a retest towards the September 20 high of $1,947 is possible.
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