Gold Retreats Below the 50 SMA As Risk Settles

Gold has been one of the most impacted assets since the conflict in Gaza started in early October. XAU continued to rise but started retreating late last month as the war did not appear to be spreading beyond Gaza. Following the breach over $2,000, Gold fell down to $1,970. It is currently trading below $1,980, where sellers came into contact with the 50 SMA (yellow) on the H4 chart, which has now been broken.

The US Dollar has been retreating lately, as markets perceive the US labor market as easing, allowing Fed members to push for keeping interest rates steady in the 5.25%-5.50% range until the end of this year. But that has not helped Gold in the last 1-2 weeks. The area above $2000/oz has proven to be a big resistance barrier for Gold and remains persistent. As the dollar declines, we have yet to see gains in GOLD , which might be due to the safe haven attraction fading as well.

XAU slipped below $1,985 yesterday, as US long-term bond rates started rising again. retreating from Friday’s highs above $2,000. Gold opened with a bearish gap after the weekend and gave back some of the gains it made on Friday following the release of the October US employment data, which showed weaker growth in both jobs and salaries. Although tensions still remain high, so despite the recent decline, safe havens are being cushioned by ongoing geopolitical tensions in the Middle East, keeping the price of Gold steady.

Therefore, Gold is likely to continue being sustained since there is still demand for safe havens in times of uncertainty, with a lower USD also supporting Gold prices. However, if we are to see a sustained break above $2000, we will need to see the US data continue to weaken further, in order to convince markets that the FED is done with rate hikes, especially after today’s 25 bps hike by the Reserve Bank of Australia. Although risk assets may profit the most from this, the USD weakening and deteriorating US fundamentals may be the impetus needed for Gold to rise sustainably higher, so we’ll see how the data comes in.

Gold XAU Live Chart