Gold price near three-week low, manages to hold above $2,600

• The price of gold is trading in a negative trend for the sixth consecutive day, amid lower bets on a Fed rate cut.
• Hopes of a possible Hezbollah-Israel ceasefire further undermine the safe haven commodity.
• Traders are now looking to the FOMC minutes for near-term impetus ahead of US inflation numbers.

The price of gold (XAU/USD) fell nearly 1.5% on the day and hit a three-week low on Tuesday, although it found some support ahead of the $2,600 round-digit mark. The US dollar (USD) was near a seven-week high amid reduced bets for another outsized rate cut by the Federal Reserve (Fed), which proved to be a key factor undermining demand for non-yielding bullion. Apart from this, news of a possible ceasefire between Lebanon’s Hezbollah and Israel weighed heavily on the safe-haven precious metal and dragged it below a short-term trading range support near the $2,630 area.

The fall, however, stalled ahead of the $2,600 mark as traders choose to wait for the release of the minutes of the September FOMC policy meeting later this Wednesday. Apart from this, the US Consumer Price Index (CPI) and the US Producer Price Index (PPI) on Thursday and Friday respectively will be looked at for further clues on the interest rate outlook. This, in turn, will play a key role in determining the next stage of a directional move for the price of gold. Meanwhile, subdued US dollar (USD) price action could prevent bears from placing new bets and limit losses for XAU/USD.

Daily Digest Market Movers: Gold price continues to be undercut by bearish bets on a 50 bps Fed rate cut in November

• The US dollar held steady near a multi-week peak hit last Friday amid diminishing chances for more aggressive policy easing by the Federal Reserve, which took gold prices below the pivotal support of $2,630 on Tuesday.
• According to CME Group’s FedWatch tool, investors have a more than 85% chance of a 25-basis-point Fed rate cut at the November meeting and a 50-basis-point cut in borrowing costs by the end of this year.
• New York Fed President John Williams said on Tuesday that it would be appropriate to cut interest rates again over time and that September’s 50 basis point rate cut should now be seen as the rule of thumb going forward.
• Separately, Fed Governor Adriana Kugler said the approach to any policy decision would continue to be data-driven and that she would support further rate cuts if inflation progress continued as expected.
• Additionally, Boston Fed President Susan Collins noted that current monetary policy is helping to cool inflation, but the U.S. economy and labor markets still appear strong and core inflation remains high.
• Meanwhile, Fed Vice Chairman Philip Jefferson said economic activity continues to grow at a solid pace, while inflation has eased substantially and the labor market has cooled from its previously overheated state.
• The benchmark 10-year U.S. Treasury yield is holding steady above the 4% mark, which continues to put some pressure on the non-yielding bullion for a sixth straight day on Wednesday.
• On the geopolitical front, Iran-backed Hezbollah hinted on Tuesday that it could be open to a ceasefire and notably left out an end to the war in Gaza as a condition for stopping the conflict on the border between Lebanon and Israel.
• Investors are now looking to the minutes of the September FOMC meeting for clues on the future path of rate cuts, ahead of Thursday and Friday’s US Consumer Inflation and US Producer Price Index numbers respectively.

Technical Outlook: Gold Price Confirms Short-Term Trading Range Breakdown; bears await weakness below $2,600

From a technical perspective, an overnight break through the $2,630 support or the lower limit of a short-term trading range could be seen as a new trigger for bearish traders. That said, the oscillators on the daily chart – although they have lost some action – are still not confirming a downside bias. Therefore, it will be prudent to wait for some selling and acceptance below the $2,600 level before positioning yourself for further losses. Gold price could then extend the corrective slide towards the next relevant support near the $2,560 area en route to the $2,535-$2,530 region and the $2,500 psychological threshold.

On the other hand, the break point of the trading range support around the $2,630-2,635 region seems to act as an immediate obstacle now. Any further move higher could be seen as a selling opportunity and remains capped near the horizontal barrier of $2,657-2,658. Sustained strength beyond has the potential to lift gold into the $2,670-$2,672 supply zone, above which bulls could look to challenge the all-time high around the $2,685-$2,686 zone reached in September. This is closely followed by the $2,700 level, which, if cleared, will set the stage for an extension of a well-established multi-month uptrend.