Gold Prices Forecast: XAU/USD Defies Rising Treasury Yields Amid Middle East Tensions

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Published: Oct 19, 2023, 06:19 GMT+00:00

Gold (XAU/USD) nears 2.5-month high despite rising Treasury yields, strong dollar; short-term sentiment bullish amid Middle East tension.

Highlights

Gold resilient despite high Treasury yields.
Mixed domestic data muddies rate outlook.
Powell’s speech could tilt scales.

Mixed Economic Indicators and Interest Rate Speculation

Gold (XAU/USD) prices are proving resilient despite the tug-of-war between a strong U.S. dollar and climbing Treasury yields. Hovering near a 2.5-month high, the precious metal is basking in its role as a safe-haven asset, thanks to increasing Middle East tensions. Investors are closely monitoring Fed Chair Jerome Powell’s upcoming speech for further cues on interest rate policy.

Impact of Domestic Data on Market Outlook

On the domestic front, recent economic data has shown mixed signals. Housing starts were slower than expected in September, while retail sales exceeded forecasts. These developments have thrown some investors into a state of caution regarding the trajectory of interest rates. Meanwhile, markets are pricing in a 94% chance of rate stabilization in the Fed’s November 1 meeting, although speculation of a December hike has gained traction.

Gold’s Resilience Amid Rising Treasury Yields

Traders are navigating a complex landscape as Treasury yields reach fresh multi-year highs. The 10-year yield has recently eclipsed 4.9%, a level not seen since 2007, making non-yielding gold less attractive. Despite this, gold has surged nearly 8% from its seven-month low in early October, showing remarkable resilience amid an uncertain backdrop.

The Fed’s Current Stance and Market Sentiment

Fed officials have recently signaled a more dovish approach, hinting that rate hikes may be off the table for now. This comes as higher Treasury yields contribute to tightening economic conditions. Given the fluctuations in Treasury yields and the Fed’s current stance, market participants are keenly awaiting Powell’s speech for more clarity.

Short-Term Forecast: Bullish

For the short term, market sentiment leans bullish for gold, especially if geopolitical strife continues to escalate. However, a de-escalation in the Middle East and hawkish shifts from the Fed could quickly reverse these gains. Keep an eye on Powell’s upcoming remarks for further insight into the interest rate landscape.

Technical Analysis

Daily Gold (XAU/USD)

The current daily price of gold at 1946.37 is positioned above both the 200-day moving average of 1930.35 and the 50-day moving average of 1902.33, indicating a bullish trend in the market.

However, it is slightly below the minor resistance level of 1952.21, which could serve as a ceiling in the near term. There is a minor support at 1811.03 that serves as a downside buffer.

The fact that the daily price is above the major moving averages suggests bullish market sentiment for gold (XAU/USD).

About the Author

James Hyerczykauthor

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.