With the geopolitical crisis of the Israel-Hamas war and a slipping dollar following a sharp dip in Treasury yields driven by dovish comments from the US Federal Reserve, gold demonstrated its ability to retain demand.
The gold price met the market’s bullish expectations on Monday, quickly testing $1863.46 per ounce, an almost $40 gain on its closing price last week.
“Whenever there is a major conflict, investors move from risky assets like stocks to traditional safe-haven assets like gold, which typically results in the precious metal increasing in value,” said PP Link Securities (PPLS) business manager Chhea Chhayheng.
After a new daily high of $1,865.41 on Tuesday, the price of gold stood firm at around $1,859 per ounce.
The uptrend in gold was also boosted by a weakening dollar, caused by dovish signals from the US Federal Reserve on interest rates.
Kitco’s Gary Wagner on October 10 reported: “Gold was supported by dollar weakness and a decline in the yield of US 10-year Treasury Notes. The dollar is currently trading lower by 0.24 per cent, and the index is fixed at 105.555”.
The technical market analyst highlighted “refreshingly dovish” comments from a senior Fed official on increasing interest rates.
“Comments emanating from Federal Reserve members have been refreshingly dovish. [Atlanta Federal Reserve President] Raphael Bostic’s comments provided this sentiment as he spoke to the American Bankers Association [on October 10].
“Asked his position as to whether the Federal Reserve should implement additional rate hikes this year, he commented: ‘I actually don’t think we need to increase rates anymore.’
“His latest comments reflect his belief that the central bank no longer needs to raise interest rates any further and anticipates that the outcome of recent hikes will not lead to a recession,” said Wagner.
Gold was as of Wednesday moving in a range of $1,845 to $1,870 per ounce in the one-hour timeframe, with technical indicators suggesting this is the beginning of a new period of high demand.
For this week’s trading recommendation, investors and traders can mark a potential resistance level of around $1,880 and $1,900 per ounce.
