XAU/USD buyers remain bullish as key support at $2,630 remains

• The price of gold is holding the red close to $2,650 at the start of a new week on Monday.
• The US dollar retreats from seven-week highs amid weaker Treasury yields, a positive risk tone.
• The gold price outlook remains constructive as long as the key support at $2,630 holds.

The price of gold is in the red at the start of a new week on Monday, but remains in the familiar range around $2,650. Amid ongoing geopolitical escalation in the Middle East, gold prices are now shifting their focus to Monday’s speeches by US Federal Reserve (Fed) policymakers, ahead of critical US Consumer Price Index (CPI) data later in the week .

Gold price suffers from US NFP

The price of gold is failing to benefit from a pullback in the US dollar (USD) from seven-week highs against its main rivals. Risk flows remain buoyant on expectations of more stimulus from China as traders return from a week-long holiday. Expanded risk appetite in Asia is weighing on safe-haven assets such as the price of gold, the US dollar, US government bonds, etc.

Weaker US Treasury yields are also adding to the greenback’s weight, failing to motivate gold buyers as the People’s Bank of China (PBOC), China’s central bank, reported no purchases of gold reserves for a fifth straight day on Monday. consecutive month in September. China is the largest consumer of gold in the world.

The main catalyst behind gold’s softer undertone so far this month is subdued expectations of a 50 basis point (bps) interest rate cut by the Fed next month. This less dovish turn in sentiment around the Fed was accentuated after Friday’s blockbuster Nonfarm Payrolls data, which completely ruled out the likelihood of a Fed rate cut for November.

Data released Friday by the US Bureau of Labor Statistics (BLS) showed non-farm payrolls rose by 254,000 in September, after gaining 159,000 (revised from 142,000) in August. The reading beat market expectations of 140,000 by a wide margin. Annual wage inflation, as measured by the change in average hourly earnings, rose slightly to 4 percent from 3.9 percent in August.

Markets are currently pricing in about a 94 percent chance the Fed will opt for a 25 bps rate cut at its next meeting, CME Group’s FedWatch Tool shows, with a 6 percent chance of a no-change decision rate.

However, the gold price managed to keep its corrective downside limited due to persistent geopolitical risks stemming from the escalating conflict between Israel and Iran. On Sunday evening, the Israel Defense Forces (IDF) said they struck several Hezbollah targets in Beirut, including Hezbollah’s intelligence headquarters. In retaliation, Hezbollah said it also launched a barrage of rockets into northern Israel late Sunday.

Growing fears that the Israel-Iran conflict could turn into a wider regional war in the Middle East remain a cause for concern for global markets. Gold traders are therefore looking forward to the upcoming Fedspeak for additional trading impetus ahead of this week’s main event risk – US consumer inflation data for September.

Gold Price Technical Analysis: Daily Chart

Despite the sluggish gold price action recently, buyers are refusing to give up as long as the static support at $2,630 holds the fort.

The 14-day Relative Strength Index (RSI) also remains well above the midline, currently near 64, supporting bullish potential.

Gold price, however, needs a daily candlestick close above the strong resistance near $2,670 to reactivate the uptrend.

The next resistance is lined up at the record high of $2,686. Above, buyers will target the $2,700 round level.

On the other hand, acceptance below the intermittent low near $2,630 is essential to unleash further decline towards the $2,600 level.

Before this level, the 21-day simple moving average (SMA) at $2,609 will test bullish commitments.