GOLD Reaches Highest Levels Since July as USD Weakens
Gold Reaches Highest Levels Since July as USD Weakens
In the early hours of Asian trading on Friday, XAU/USD extended its rally, reaching $1,984, marking the highest level since late July. The surge in the price of the precious metal is attributed to the weakening US dollar (USD), fueled by dovish comments from Fed Chair Jerome Powell and increased safe-haven demand.
Conversely, the US Dollar Index (DXY), which measures the USD against six major currencies, stabilized at around 105.85 following recent losses. US Treasury yields showed an uptick, with the 10-year Treasury yield settling at 4.99%, the highest level seen since 2007.
Thursday's US job data indicated a robust US economy. Weekly Initial Jobless Claims fell to 198,000 for the week ending October 14, the lowest level since January. However, existing home sales experienced a 2.0% month-on-month decline in September and a 19% year-on-year drop, marking the lowest level since 2010. These figures suggest that higher mortgage costs are negatively impacting the confidence in the housing market.
Fed Chair Jerome Powell expressed a preference for a pause in rate hikes, instead focusing on observing economic data in the coming months. Powell also mentioned that further monetary policy tightening could be considered if there is more evidence of above-trend economic growth and a tight labor market. These comments resulted in a broad decline in the USD and bolstered gold prices denominated in USD.
From a technical analysis perspective, our assessment reveals that the price of gold broke through the 61.8% Fibonacci level with a bullish candle and surged from the premium zone. The next significant barrier is the 78.6% Fibonacci level, where the price may experience a rebound. Our expectation is that the price will rebound from the 78.6% Fibonacci level with a retest of the 50% balance area. This suggests an interesting journey ahead for the price of gold.
Our preference
Long positions above 1950.00 with target at 2012.30
In the early hours of Asian trading on Friday, XAU/USD extended its rally, reaching $1,984, marking the highest level since late July. The surge in the price of the precious metal is attributed to the weakening US dollar (USD), fueled by dovish comments from Fed Chair Jerome Powell and increased safe-haven demand.
Conversely, the US Dollar Index (DXY), which measures the USD against six major currencies, stabilized at around 105.85 following recent losses. US Treasury yields showed an uptick, with the 10-year Treasury yield settling at 4.99%, the highest level seen since 2007.
Thursday's US job data indicated a robust US economy. Weekly Initial Jobless Claims fell to 198,000 for the week ending October 14, the lowest level since January. However, existing home sales experienced a 2.0% month-on-month decline in September and a 19% year-on-year drop, marking the lowest level since 2010. These figures suggest that higher mortgage costs are negatively impacting the confidence in the housing market.
Fed Chair Jerome Powell expressed a preference for a pause in rate hikes, instead focusing on observing economic data in the coming months. Powell also mentioned that further monetary policy tightening could be considered if there is more evidence of above-trend economic growth and a tight labor market. These comments resulted in a broad decline in the USD and bolstered gold prices denominated in USD.
From a technical analysis perspective, our assessment reveals that the price of gold broke through the 61.8% Fibonacci level with a bullish candle and surged from the premium zone. The next significant barrier is the 78.6% Fibonacci level, where the price may experience a rebound. Our expectation is that the price will rebound from the 78.6% Fibonacci level with a retest of the 50% balance area. This suggests an interesting journey ahead for the price of gold.
Our preference
Long positions above 1950.00 with target at 2012.30
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