Gold Backs Off after its Best Week since March

  • XAUUSD
    (${instrument.percentChange}%)

XAU/USD Analysis

Hamas launched a surprise and deadly attack on Israel on Saturday October 7 and the country retaliated, with Prime Minister Netanyahu pledging "a crushing victory" over the Palestinian militant organization [1]. The events created risk aversion and Gold attracted safe-haven flows.

The precious metal also benefited from soft Fed rhetoric, since some voters diverged from the hawkish bias of the last policy decision. Ms Logan for example, recently said that there "may be less need to raise the fed funds rate" due to the elevated long-term bond yields [2]. Mr Kashkari doubled down, saying "it's certainly possible that higher long-term yields may do some of the work for us in terms of bringing inflation back down".[3]

As a result, XAU/USD registered its best week since March. It has moved above the EMA200 (black line) and the July highs (1.987) are now in its eyesight, but we are a still cautious around sustained strength.

However, the commodity shows caution this week, as fears around the Middle East situation appear to be somewhat subdued. Israel intends to move into the Gaza Strip, but that has not yet happened. Iran has denied any role in the attacks [4] and the US has not found any direct involvement so far [5] and a spillover is so far prevented.

There is scope for a XAU/USD return back below the EMA200 (at around 1,990), which would shift immediate bias to the downside again, but 1,804 will require a strong catalyst. The next leg of the move will be determined by today's releases from the US and Mr Powell's speech on Thursday, to see if he will reaffirm the higher-for-longer narrative, or lean more dovish as some officials recently did.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 17 Oct 2023 https://www.gov.il/en/departments/news/ironswords1016202375

2

Retrieved 17 Oct 2023 https://www.dallasfed.org/news/speeches/logan/2023/lkl231009

3

Retrieved 17 Oct 2023 https://www.youtube.com/watch

4

Retrieved 17 Oct 2023 https://newyork.mfa.ir/portal/NewsView/731039/The-Position-of-the-Islamic-Republic-of-Iran-Regarding-the-Ongoing-Situation-in-the-Occupied-Palestine

5

Retrieved 01 Mar 2024 https://www.state.gov/secretary-antony-j-blinken-with-dana-bash-of-cnns-state-of-the-union-3/

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