Relentless Gold Demand Turns to Relentless Selling for XAU/USD
Gold opened with a $25 gap lower yesterday, but it jumped $35 to close the gap within minutes, however it has turned back down losing $90 so far, on the Lebanon-Israel truce.
Geopolitical Tensions Boost Gold
Gold’s recent performance reflects the impact of global geopolitical uncertainties, particularly the ongoing Middle East conflict and the Russia-Ukraine war. Escalated violence last week, including intensified Russian military actions in response to Ukraine’s missile offensives, has heightened the demand for safe-haven assets like gold. Investors are hedging against the risk of broader economic consequences and potential escalation of hostilities, adding a risk premium to gold prices.
US Monetary Policy Limits Upside
While geopolitical risks support gold, the US Federal Reserve’s cautious stance on rate cuts presents a counterweight. Despite global economic weakness outside the US, the domestic economy’s resilience tempers expectations for monetary accommodation. Markets now anticipate a 25-basis-point rate cut in December and only two additional cuts in 2025, far fewer than previously expected. This outlook restrains gold’s upside potential.
Recent Gold Price Action
Gold (XAU/USD) started the early Asian session below $2,700 but quickly rebounded above $2,720, showing robust demand, but sellers returned again in the European session and the retreat has continued into the US session, with XAU falling below $2,600. Despite strong bullish momentum in the US dollar, GOLD prices remain supported due to persistent global uncertainties. Volatility in gold remains elevated, underscoring its status as a preferred safe-haven asset.
Gold Chart Daily – Most of Last Week’s Gains Have Been Erased
Reports of an imminent truce between Israel and Lebanon have exerted downward pressure on both oil and gold prices. Despite a truce already being in place for weeks, the market reaction to this news has been surprisingly strong. Gold has dropped by approximately $90, reversing a significant portion of the gains made during last week’s robust rally. For gold, the sharp decline seen today underscores the importance of the October peak at $2,790 as a critical level to watch.
However, attributing the end of gold’s upward momentum solely to Middle East developments seems premature, especially on a day when the U.S. dollar is weakening, and Chinese markets are facing renewed pressure. Still, today’s steep selloff is not a favorable technical signal for gold’s near-term traders.
So, key geopolitical conflicts remain crucial for determining gold’s trajectory. Should tensions ease further, the risk premium in gold prices may diminish, as we witnessed today, potentially leading to further short-term weakness. However, as long as uncertainties persist and economic concerns loom, gold is likely to retain its appeal as a hedge against risk, but once the selloff is over. Gold has declined around $100 from top to bottom today, so we are following the price action to see where the decline will stop.
Gold Live Chart
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