Article by: ETO Markets
Gold (XAU/USD) has recovered to around $… on Friday after hitting a two-month low. However, its upside potential may be limited by a strong US Dollar and uncertainty surrounding the Federal Reserve's pace of interest rate cuts. Expectations of higher inflation next year due to Donald Trump's policies have reduced the likelihood of rate cuts, making gold less appealing as higher interest rates reduce the attractiveness of non-yielding assets.
Despite this, geopolitical tensions, such as the conflict in the Middle East and the Russia-Ukraine war, may push gold prices higher as investors seek safe-haven assets. Key upcoming data, including US Retail Sales for October and the NY Empire State Manufacturing Index, will be closely watched.
Fed officials, including Jerome Powell and Thomas Barkin, have suggested that the US economy is performing well, providing room for gradual rate cuts. The US Producer Price Index (PPI) rose 2.4% YoY in October, above expectations, and weekly Initial Jobless Claims increased to 217K, slightly lower than expected. The markets now see a 59.1% chance of a 25-basis point rate cut by the Fed in December, down from 75% last week.
Gold (XAU/USD) is trading higher on the day but remains vulnerable on the daily chart as it nears the 100-day Exponential Moving Average (EMA). With the 14-day Relative Strength Index (RSI) below the 50 mark at 33.60, the possibility of further downside remains. Sustained trading below the 100-day EMA could open the door to $… , the September 8 low, followed by additional support at $… , the July 25 low, and potentially the $2,300 psychological level. On the upside, immediate resistance lies at $… , the September high. A decisive break above this resistance could propel gold toward $… , the November 6 high.
