Peter Smith
Gold (XAU/USD) remains under pressure at $2,632, despite a weaker USD and China's economic measures. Mixed global market sentiment and geopolitical risks complicate gold's outlook.
Gold Prices Under Pressure Amid China's Stimulus
Gold (XAU/USD) continues to face downward pressure, with prices hovering around $2,632 after reaching a high of $2,656. Despite favorable conditions such as a weaker U.S. dollar and dovish expectations from the Federal Reserve, gold struggles to attract bullish momentum due to the ongoing risk-on sentiment in global markets.
China’s recent stimulus measures, which include cutting mortgage rates for existing loans by the end of October and introducing its largest economic package since the pandemic, have dampened demand for safe-haven assets like gold. While the People's Bank of China’s actions boost investor confidence, they reduce the need for protective assets as risk appetite grows.
China’s Economic Data and XAU/USD Impact
Despite China's stimulus, the country's economic recovery appears uneven. The official Manufacturing PMI for September increased to 49.8 from 49.1 in August, signaling a slower contraction. However, the Caixin Manufacturing PMI dropped to 49.3, while the Non-Manufacturing PMI fell slightly to 50.0, barely indicating growth. This mixed data limits the positive impact of China's measures on global market sentiment, leaving the future trajectory of XAU/USD uncertain.
Meanwhile, geopolitical risks in the Middle East support XAU as a safe-haven asset. Escalating tensions between Israel and Iran-backed groups like Hezbollah have fueled demand for gold. Over the weekend, Israeli airstrikes targeted various locations in Yemen and Lebanon, sparking concerns about potential disruptions to global supply chains.
“Gold remains caught between risk-on sentiment driven by China’s stimulus and the safe-haven demand due to escalating geopolitical tensions,” commented Priyanka Sachdeva, Senior Market Analyst at Phillip Nova.
Dovish Fed and Weak U.S. Dollar Keep XAU/USD Afloat
In the U.S., expectations of a dovish Federal Reserve continue to support gold prices by weakening the dollar. Market analysts expect the Fed to cut interest rates by 50 basis points in November, which has kept the U.S. dollar near its lowest levels since July 2023. A weaker dollar typically makes gold more affordable for foreign buyers, thus supporting XAU/USD.
However, the mixed signals from global markets and geopolitical risks make the gold market outlook uncertain, with prices struggling to find a clear direction.
XAU/USD Technical Analysis: Key Levels to Watch
XAU/USD trades at $2,632, down 0.06%, reflecting mild bearish sentiment. The price is below the pivot point of $2,659.52 and the 50-day EMA of $2,659.49, suggesting a potential further downside. Immediate support for XAU stands at $2,647.30, followed by $2,640.15 and $2,630.95. Gold could test the 200-day EMA at $2,628.98 if prices break below these levels.
On the upside, a break above $2,665.87 is needed to trigger a bullish reversal. Higher resistance levels are set at $2,674.13 and $2,683.18. Until gold prices break through $2,660, the downward trend remains intact.
Conclusion
In the short term, gold prices will likely remain under pressure, with key support at $2,630. A break below this level could trigger further downside, while a rise above $2,665 is necessary for a bullish reversal. Traders should remain cautious as global market sentiment continues to fluctuate due to China’s stimulus efforts and ongoing geopolitical tensions.
Peter Smith
