GOLD Prices Surge Amid Geopolitical Tensions, Dovish Fed...

Gold Prices Surge Amid Geopolitical Tensions, Dovish Fed

Gold price is showing strong momentum for its next upward move, targeting the $1,880 level. A weakening US Dollar, driven by dovish Federal Reserve expectations, combined with a positive market sentiment, sets the stage for Gold's ascent. As we analyze the technical setup over a 4-hour timeframe, it's evident that Gold is poised for a fresh upswing.

In recent times, Federal Reserve policymakers have adopted a more dovish tone. Traders have adjusted their expectations, with the likelihood of another rate hike from the Fed before the end of the year now hovering at a mere 13%. Atlanta Fed President Raphael Bostic's statement that "we don't need to increase rates any more" and similar sentiments from other Fed officials reflect this cautious outlook. They believe that higher bond yields might reduce the need for the Fed to take further action.

These dovish comments reinforce the belief that rising borrowing costs for both households and businesses could help alleviate inflationary pressures, potentially dissuading the Fed from further tightening its monetary policy.

The expectation of a dovish Fed, combined with hopes of additional stimulus measures from China, has boosted risk appetite. Even amidst uncertainties arising from the Hamas-Israel conflict, China is reportedly considering issuing more than CNY1 trillion ($137.1 billion) in sovereign debt for infrastructure projects, aiming to meet its annual growth target.

These factors have created a bearish scenario for the US Dollar and driven US Treasury bond yields lower. As a result, Gold buyers remain confident, keeping prices near weekly highs above $1,860.

However, the potential for further gains in Gold price is currently held in check, as traders exercise caution ahead of significant events. Specifically, they are awaiting the release of the US Producer Price Index (PPI) inflation data and the Minutes from the Fed's September policy meeting, both scheduled for Wednesday. These events could contribute to the bearish sentiment surrounding the US Dollar and support Gold's recovery from seven-month lows.

In the technical analysis, we find that Gold faces two important levels of interest today. These levels correspond to the 50% and 61.8% Fibonacci retracement levels, which align with a previous resistance area. This zone may act as a supply area, causing a temporary pullback in the direction of the prevailing bearish trend. Alternatively, Gold could continue to decline in the coming days, targeting the previous lower low. A critical level to watch is 1901.050, as any bullish notion will be reconsidered at this point.


Short-Term Setup | Our preference:

Short positions below 1901.050 with targets at 1850.000 & 1810.550 in extension.