Gold price falls below $2,650 as hopes for ceasefire rise

• Gold fell to a daily low of $2,604 amid hopes of a truce between Israel and its neighbors.
• Demand for safe havens weakens as Hezbollah backs cease-fire efforts, while rising US Treasury yields further weigh on Bullion.
• Traders are adjusting Fed rate cut expectations, focusing on upcoming US inflation data, jobless claims and consumer sentiment.

Gold prices fell sharply on Tuesday following a strong US jobs report and news that Hezbollah backed calls for a truce in the conflict between them and Israel. Therefore, indications of a possible de-escalation of the Middle East conflict opened the door for traders to take profits. XAU/USD is trading at $2,615, down over 1%.

US stocks remain supported by an improvement in market sentiment. Bullion remained near year-to-date (YTD) highs on fears of a further escalation of hostilities in the Middle East. However, signs of a possible resolution to the conflict would trigger outflows from safe-haven assets to riskier ones. According to CNN, “Hezbollah supports efforts to achieve a ceasefire in Lebanon, its top official said Tuesday.”

This sponsored a sell-off in XAU/USD, which fell over $35 to a daily low of $2,604 before buyers lifted prices to current spot prices. Additionally, rising US Treasury yields weighed on the non-performing metal. The benchmark US 10-year rate remains unchanged above 4%, but rose more than six basis points this week after last Friday’s September non-farm payrolls (NFP) report.

Given the backdrop, interest rate traders adjusted their expectations of the Federal Reserve’s (Fed) next move. Most Fed speakers who have come across the wire have taken a gradual tone on easing monetary policy. However, some, such as Fed President St. Louis, Alberto Musalem projected only a further cut towards the end of the year after supporting the 50 bps cut in September.

Meanwhile, the greenback is clinging to minimal gains as next week’s US record will include the release of inflation data, the latest Fed meeting minutes, initial jobless claims and consumer sentiment from the University of Michigan.

Daily Market Reasons: Gold Prices Fall on Hopes of Middle East Ceasefire

• The U.S. dollar index ( DXY ), which tracks the greenback against a basket of six currencies, is at 102.52, basically unchanged but at levels last seen in August 2024.
• 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.
• According to CME FedWatch Tool data, the odds of a 25 bps Fed rate cut are 85.3%. Meanwhile, the odds of a 50bps rate cut are 0%, but rose to 14.7% for a hold.
• 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

Gold prices fell below $2,650 on Tuesday, which could open the door for a deeper pullback. After briefly testing the $2,605 area, it recovered some ground. But so far, it has failed to gain traction to aim higher and break the $2,650 mark.

Momentum shows bears intensifying as the Relative Strength Index (RSI), despite being bullish, is aggressively targeting lower.

Once XAU/USD broke below the September 30 low of $2,624, it sponsored a move towards the $2,600 mark. On further weakness, the next floor will be the 50-day Simple Moving Average (SMA) at $2,534.

Conversely, if Gold prints a daily close above $2,650, XAU/USD needs to break above $2,670 to challenge the YTD high of $2,685. Next up will be the $2,700 mark.