Gold price extends range below record high, bulls not ready to give up just yet

• The price of gold is struggling to attract any significant buying amid the sustained strength of the US dollar.
• Reduced bets on a 50 bps Fed rate cut in November lifted the USD to a multi-week high.
• Geopolitical risks continue to act as a tailwind for XAU/USD ahead of US data.

The price of gold (XAU/USD) remains on the defensive during the Asian session on Thursday, amid a stronger US dollar (USD) that continues to draw support from declining odds for more aggressive policy easing by the Federal Reserve (Fed). . The upbeat US ADP report on Wednesday underlined underlying stability in the labor market and forced investors to further reduce their bets on another Fed rate cut in November. That in turn pushed the USD index (DXY), which tracks the greenback against a basket of currencies, to a three-week high and is proving to be a key factor undermining demand for the unyielding yellow metal.

The downside for the gold price, however, appears to be softening following a further escalation of conflicts in the Middle East. Iran fired more than 200 ballistic missiles at Israel on Tuesday, while the latter carried out a precision airstrike and bombarded central Beirut in Lebanon in the early hours of Thursday. This raises the risk of all-out war in the region, which in turn may continue to act as a tailwind for the safe-haven precious metal. Meanwhile, traders may also refrain from placing aggressive directional bets and prefer to wait for the release of closely watched monthly US employment details – the Nonfarm Payrolls (NFP) report on Friday.

Daily Digest Market Movers: Gold price bulls stay on edge amid stronger USD, geopolitical risks help limit losses

• Stronger US labor market reports and relatively shocking remarks from Federal Reserve Chairman Jerome Powell on Monday are helping the US dollar extend its recovery from July 2023 lows.
• The US JOLTS Job Openings survey released on Tuesday showed that the number of available jobs unexpectedly rose by 329,000 from an upwardly revised 7.711 million in the previous month to 8.040 million in August.
• Additionally, Automatic Data Processing (ADP) reported on Wednesday that private sector employers added 143,000 jobs in September, compared with expectations for a 120,000 increase and the upwardly revised figure of 103,000 from August.
• That provided evidence of a still resilient US labor market and forced investors to reassess the likelihood of another 50 basis point interest rate cut by the US central bank at its next monetary policy meeting in November.
• Added to that are hopes that China’s massive stimulus measures will spark a lasting recovery in the world’s second-largest economy and will continue to act as a headwind for gold prices on Thursday.
• On the geopolitical front, an Israeli strike in central Beirut, Lebanon, early Thursday comes after Iran fired more than 180 ballistic missiles at Israel on Tuesday, raising the risk of an all-out war in the Middle East.
• The mixed fundamental backdrop calls for some caution before placing aggressive directional bets around XAU/USD ahead of key US macro data, including Friday’s closely watched Nonfarm Payrolls report.
• Meanwhile, Thursday’s US economic file – which includes initial jobless claims and ISM services PMI – and speeches by influential FOMC members could generate near-term opportunities around the precious metal.

Technical outlook: Gold price setup remains bullish, bounce back to $2,625-$2,624 holds key

From a technical perspective, the range-bound price action from earlier this week comes on the back of the recent strong rally to a record high and could still be categorized as a bullish consolidation phase. Moreover, the oscillators on the daily chart are staying comfortably in positive territory and have also dropped out of the overbought zone. This, in turn, favors bullish traders and suggests that the path of least resistance for gold prices remains up. Meanwhile, the $2,672-$2,673 area could continue to provide immediate resistance ahead of the $2,685-2,686 area or the all-time high reached last week. This is closely followed by the $2,700 level, which, if conquered, will be seen as a new trigger for the bulls and set the stage for an extension of a well-established multi-month uptrend.

On the other hand, the weekly low around the $2,625-2,624 area, which coincides with a short-term ascending channel resistance breakout point, could continue to provide support and act as a key pivotal point. A convincing break below could trigger aggressive technical selling and pull the gold price below the $2,600 level towards the next relevant support near the $2,560 area. The corrective decline could extend further towards the $2,535-$2,530 support before XAU/USD finally breaks down to the psychological $2,500 level.