Gold stays on the defensive as expectations for a 50 basis point Fed rate drop in November fall.
On Monday, the gold price (XAUUSD) extended its sideways consolidative price move and remained constrained in a typical range held over the previous week or so, despite contradictory underlying signals. The positive US monthly employment data announced on Friday prompted markets to discount the prospect of another big interest rate decrease by the Federal Reserve (Fed) in November.
The USD consolidates last week’s robust gains and helps to restrict the XAUUSD.
The US Dollar (USD) is trading near a seven-week high, which, combined with a generally positive risk tone, serves as a headwind for the non-yielding yellow metal.
Geopolitical threats may continue to function as a tailwind, limiting losses for the precious metal.
The risk of additional geopolitical tensions in the Middle East may continue to boost the safe-haven gold market and limit any losses. Furthermore, the recent range-bound price movement indicates traders’ uncertainty about the next leg of a directional move. This makes it even more wise to wait for substantial follow-through selling before establishing that the XAUUSD has peaked and preparing for any meaningful corrective collapse in the absence of any relevant market-moving US macro data.
Daily Market Movers: Gold pricing undercut by predictions of lower dovish Fed, bullish USD.
Friday’s massive US job data dampens market hopes for a more aggressive policy easing by the Federal Reserve and continues to erode demand for the non-yielding gold price.
The US Labor Department said that the economy added 254K jobs in September, well exceeding expectations, and the unemployment rate unexpectedly fell to 4.1% from 4.2%.
Additional information revealed that 72K more jobs added in July and August than originally reported, indicating that the labor market remains resilient and that the economy is in much better shape.
According to the CME Group’s FedWatch Tool, traders now estimate a roughly 95% possibility of the Fed lowering borrowing costs by 25 basis points at the end of the November policy meeting.
The yield on the benchmark 10-year US government bond remains close to 4.0%, while the US Dollar is around a seven-week high.
The yield on the benchmark 10-year US government bond remains close to 4.0%, while the US Dollar is around a seven-week high, putting the XAUUSD bulls on the defensive.
The good US NFP report alleviated concerns about an economic slowdown, which, combined with confidence about China’s stimulus, continues to sustain the upbeat sentiment in the equities markets.
Israel intensified its bombing of Gaza’s Jabalia refugee camp and launched another wave of airstrikes in Lebanon. Hezbollah retaliated by attacking Israel’s Haifa on Monday morning.
The developments increase the likelihood of a full-blown war in the Middle East and may continue to boost the commodity’s safe-haven character, so pessimistic traders should exercise care.
Official data were published previously. China’s gold reserves were constant for the fifth consecutive month, totaling 72.8 million fine troy ounces at the end of September.
