Article by: ETO Markets

Gold prices have continued to strengthen this week on the back of geopolitical tensions and risk aversion in the market, hovering near three-week highs. The continued escalation of the Middle East conflict, with Israeli Prime Minister Benjamin Netanyahu rejecting a proposed ceasefire with Lebanon and Hezbollah threatening to expand the scope of its attacks, has intensified investor demand for safe havens, thus supporting the rally in gold. In addition, the US government's warning to Israel to speed up the delivery of humanitarian aid to Gaza or face possible sanctions, including a halt to arms transfers, also added to the market's nervousness.

On the other hand, the decline in US Treasury yields has also provided additional support for non-yielding gold prices. Investors' expectations for further Fed rate cuts have risen as US manufacturing data came in below expectations and lower oil prices eased inflationary pressures. However, increased expectations that the Fed will opt for a smaller rate cut (25 basis points) at the November FOMC meeting supported the dollar's strong performance. Although the strength of the US dollar has limited the room for further gains in gold, the price of gold has still shown resilience.

From a technical point of view, gold prices continue to receive support from the $… area, but face resistance near the all-time high of $…-…. A break above the psychological level of $… would set the stage for a multi-month uptrend. The technical indicators on the daily chart remain in positive territory, suggesting that gold prices still have the potential to rise further.

Conversely, if the gold price breaks below the $… support level, it may fall back to the $…- $… area. Even with further declines, the $… level is expected to attract bargain buying and act as a key support level. If this level is effectively breached, it could trigger a technical sell-off, leading to a deeper decline.