Gold prices supported by weakening dollar

Gold prices remained steady on Monday, oscillating around the $2,740 per ounce level. If gold prices rise, they may encounter resistance at the psychological level of $2,800 per ounce, while if gold prices decline, support may be encountered near $2,700 per ounce. 

Gold prices have been typically directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar plummeted on Monday, and the dollar index dropped from 104.3 to 103.9. US treasury yields also dipped, with the US 10-year bond yield dropping from 4.39 to 4.29%.

Uncertainty over the upcoming US presidential elections is causing volatility in gold prices. The US elections on November 5th are attracting considerable market attention. The implications of the election outcome, however, are complex and will likely cause volatility in gold prices in the weeks to come.

Gold prices continue to rise on expectations of further Fed rate cuts. The US Federal Reserve pivoted to a more dovish policy last week, performing a sharp rate cut of 50 basis points. The Federal Reserve decided to end its restrictive monetary policy in September, bringing its interest rate down to a target range of 4.75% to 5.00%. 

The US Federal Reserve will announce its interest rate decision on November 7th and is expected to lower interest rates by 25 basis points this week. After the meeting, market participants will focus on Fed Chair Jerome Powell’s press conference for hints on the Fed’s rate outlook.

Geopolitical tensions raise the appeal of safe haven assets propping up gold prices. Gold prices hit a new all-time high of $2,789 per ounce on Wednesday. Gold prices had been trading in overbought territory, however, and tumbled on Thursday as traders started realizing their gains. 

The crisis in the Middle East is boosting demand for safe-haven assets, keeping gold prices high. In the past few weeks, markets had been bracing for Israel’s retaliatory attack against Iran, keeping gold prices up. Israel’s attack over the weekend, however, did not inflict substantial damage and was seen as a token retaliatory attack. The Iranian government announced that there would be an appropriate response to Israel’s attack, but Iran’s President emphasized that they do not seek a war with Israel. Signs that the crisis between Israel and Iran is de-escalating put pressure on gold prices towards the end of last week. On Saturday, however, Iran’s Supreme Leader Ayatollah Ali Khamenei threatened Israel with a crushing response, which is likely to raise the appeal of safe-haven assets again this week.

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Written by:
Myrsini Giannouli

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