Gold price falls as US yields rise on risk

• Gold is trading at $2,645, down 0.30%, as US 10-year Treasury yields rise to 4.026%, further capping gains.
• Escalating conflict in the Middle East involving Israel, Hamas and other groups such as the Houthis supports Gold amid risk sentiment.
• Market expectations for a 25 bps Fed rate cut remain high at 83.5%, while a 50 bps cut is not for now.

Gold prices edged lower during Monday’s North American session but remained in the $2,630-$2,659 range as US Treasury bond yields capped the yellow metal’s advance while escalating conflict in the Middle East kept the precious metal from falling in continuation. XAU/USD trades at $2,645, down 0.30%.

Market sentiment deteriorated due to the war in the Middle East. The exchange of fire prolonged as Israel continued its ground operations in Lebanon, while Hamas fired rockets at Tel-Aviv. Hopes for a ceasefire have faded as the conflict has expanded to involve other groups such as the Houthis attacking ships in the Red Sea.

Meanwhile, the latest stellar September Non-Farm Payrolls report sparked a rally in US Treasury yields.

Traders ignored a 50 basis point (bps) cut by the Federal Reserve (Fed), according to CME FedWatch Tool data. The odds for a 25 bps Fed rate cut are 83.5%. Meanwhile, the odds of a 50bps rate cut are 0%, but rose to 16.5% for a hold.

The 10-year U.S. Treasury yield rose more than five and a half basis points to 4.026 percent as traders appeared confident the Fed would cut borrowing costs by 25 bps at each of its last two policy meetings in 2024.

Meanwhile, the greenback is clinging to minimal gains as the U.S. dollar index (DXY), which tracks the greenback against a basket of six currencies, is at 102.52, largely unchanged but at levels last seen in August 2024 .

Next week, the US file will feature inflation data, the latest Fed meeting minutes, jobless claims and consumer sentiment from the University of Michigan.

Daily Market Reasons: Gold prices fall on US recession fears

• Recession fears have faded following the latest US jobs report. As a result, most Wall Street banks such as Citi, JP Morgan and Bank of America revised their November Fed call from a 50 bps rate cut to 25 bps.
• Minneapolis Fed President Neel Kashkari said he sees no signs of “resurgent inflation” and is confident inflation is returning to 2 percent.
• Meanwhile, the People’s Bank of China (PBoC) halted its bullion purchases for the fifth month. China’s reserves were unchanged as their holdings stood at 72.8 million troy ounces at the end of last month.

XAU/USD Technical Analysis: Gold price lowers as sellers hold below $2,650

The price of gold remains bounded in a trading range, while the relative strength index (RSI) suggests that it is on the downside, despite printing upbeat readings. However, the slope accelerates downward, closing towards the neutral line.

If XAU/USD breaks below the September 30 low of $2,624, this could sponsor a move down towards the $2,600 level. On further weakness, the next floor will be the 50-day Simple Moving Average (SMA) at $2,531.

On the other hand, if Gold prints a daily close above $2,650, XAU/USD needs to break above $2,670 to challenge the year-to-date high of $2,685. Next up will be the $2,700 mark.