Gold Drops to $2,735; Week Ahead Focus on Middle East Tensions and US Data

Gold (XAU/USD) ended the week on a bearish note, dropping to around $2,735.16 on Friday after hitting an intra-day low of $2,733.20.

The precious metal briefly rose into the $2,760s following the release of the US Nonfarm Payrolls (NFP) data, which showed a smaller-than-expected increase of just 12,000 jobs in October, compared to the forecast of 113,000 and a revised-down figure of 223,000 for September. However, it quickly fell back to the $2,740s.

On the flip side, the losses could be short-lived, as the precious metal is experiencing renewed demand as a safe haven following recent violence in the Middle East.

However, the Hezbollah rocket attack in northern Israel killed seven people, marking the worst incident in months, while Israeli bombings in Beirut resulted in over 55 fatalities.

Economic Data Pressure on US Dollar and Its Impact on Gold Prices

On the US front, the broad-based US dollar faced pressure after mixed signals from economic data.

The precious metal gold briefly climbed into the $2,760s following the release of the US Nonfarm Payrolls (NFP) report, which showed only 12,000 jobs added in October, far below the expected 113,000 and the revised figure of 223,000 for September.

However, the ISM Manufacturing Purchasing Managers’ Index (PMI) reported a decline in activity, falling to 46.5 in October from 47.2 in September, missing the expected 47.6. This decline raised concerns about economic growth.

In contrast, the ISM Manufacturing Prices Paid Index increased to 54.8 in October, up from 48.3 and above the forecast of 48.5.

However, the rising prices could make the Federal Reserve less likely to cut interest rates aggressively, which may have contributed to gold’s sell-off.

Despite the weak job growth reported in the NFP, which may raise alarms for the Fed regarding the labor market, other data showed that the unemployment rate held steady at 4.1%, while average hourly earnings rose to 4.0%.

Gold’s price initially spiked on weak job growth, signaling potential Fed rate cuts, but rising manufacturing prices and steady unemployment reduced rate-cut expectations, leading to a sell-off.

Gold Prices Rise Amid Escalating Middle East Tensions and US Political Uncertainty

Moreover, the losses in gold could be short-lived due to increased safe-haven demand after hopes for a ceasefire in the Middle East were shattered.

As per the latest report, the recent rocket attack by Hezbollah in northern Israel killed seven people, marking one of the worst strikes in months, raising concerns about further violence in the region.

Moreover, Israel has intensified its bombing of Beirut, resulting in over 55 deaths. These developments create uncertainty, prompting many investors to turn to gold as a safer investment option during these turbulent times.

Furthermore, the upcoming US presidential election create uncertain environment in the market. This uncertainty prompts more investors to seek gold, viewing it as a stable asset.

Therefore, the combination of escalating conflict in the Middle East and political risk in the US is driving gold prices higher.

Gold Price Forecast

Gold (XAU/USD) is currently priced around $2,736, hovering near a key ascending trendline support around $2,731. This level has provided solid support recently, holding despite the downward pressure. Immediate resistance is marked at $2,743, aligning with the pivot point, followed by a stronger resistance zone near $2,750 and $2,756. A breakout above these levels could signal a recovery towards $2,766, resuming the bullish trend.

Technical indicators suggest a cautious outlook. The Relative Strength Index (RSI) rests around 33, indicating oversold conditions and potential for a bounce. However, with the 50-period Exponential Moving Average (EMA) at $2,755, gold faces additional resistance, making a recovery challenging unless strong buying momentum emerges.

In conclusion, a close below $2,731 could open the path towards further downside, with the next support at $2,725 and $2,718. Traders will watch for a decisive move above $2,743 to confirm a potential reversal.

Key Insights:

• Support Zone: Key trendline support at $2,731, with immediate resistance at $2,743.
• Technical Indicator: RSI at 33, indicating oversold conditions.
• 50 EMA Resistance: Gold faces resistance at the 50 EMA around $2,755.