TLDR:
- Gold price remains below all-time peak amid mixed signals
- China’s stimulus measures boost risk appetite, pressuring gold
- Geopolitical tensions in Middle East provide some support for gold
- Dovish Fed expectations limit gold’s downside
- Traders await Fed Chair Powell’s speech for further direction
Gold prices remained range-bound below their all-time peak on Monday as investors weighed conflicting economic signals and geopolitical developments.
The precious metal faced some selling pressure for the second consecutive day but found support from ongoing geopolitical tensions and expectations of dovish Federal Reserve policy.
China’s recent stimulus measures have boosted investor appetite for riskier assets, putting some downward pressure on gold. The People’s Bank of China announced on Sunday that banks would be instructed to lower mortgage rates for existing home loans by October 31.
This move follows a series of monetary, fiscal, and liquidity support measures implemented last week, forming China’s largest stimulus package since the pandemic.
Escalating geopolitical risks in the Middle East have helped limit gold’s losses. Israel expanded its military operations against Iran’s allies, launching airstrikes on Houthi targets in Yemen and Hezbollah positions in Lebanon. These actions have fueled concerns about a potential wider conflict in the region, supporting demand for safe-haven assets like gold.
The market’s expectations for Federal Reserve policy continue to play a crucial role in gold’s price movements.
Current pricing suggests a high likelihood that the Fed will implement another 50 basis point interest rate cut at its November meeting. This outlook for lower borrowing costs has kept the U.S. dollar near its lowest levels since July 2023, providing indirect support for gold prices.
Recent economic data from China has presented a mixed picture. While the official Manufacturing PMI improved to 49.8 in September from 49.1 in August, beating estimates, the Non-Manufacturing PMI unexpectedly fell to 50.0. Additionally, the Caixin Manufacturing PMI contracted to 49.3 in September from 50.4 the previous month, and the Services PMI dropped to 50.3 from 51.6 in August.
In the United States, St. Louis Fed President Alberto Musalem suggested on Friday that the central bank should return to gradual interest rate cuts after a larger-than-usual half-point reduction in September. This statement aligns with market expectations for continued monetary easing.
From a technical perspective, gold’s price action suggests that bulls are not ready to give up. The precious metal has found support near a short-term ascending trend-channel resistance breakpoint around $2,625. However, the Relative Strength Index (RSI) on the daily chart remains near overbought territory, indicating the potential for some consolidation or profit-taking in the near term.
Resistance levels for gold include the recent all-time high of $2,685-$2,686 and the psychologically important $2,700 mark. On the downside, support can be found at $2,600, with further backing at $2,560 and $2,535-$2,530.
Traders are now looking ahead to a speech by Federal Reserve Chair Jerome Powell for fresh insights into the central bank’s policy outlook.
Powell’s comments could provide crucial guidance on the future direction of interest rates and, by extension, gold prices.
