Market Analysis

On Wednesday, gold prices (XAU/USD) experienced a significant reversal, dropping approximately $50 after reaching a new record high around $2,760. This decline was influenced by slightly overbought conditions on the daily chart, a rise in U.S. Treasury bond yields, and a stronger U.S. dollar, leading to profit-taking in the non-yielding metal. However, ongoing political uncertainty ahead of the November 5 presidential election and tensions in the Middle East helped the safe-haven asset stabilize above the $2,700 mark.

As the U.S. dollar retreated from its highest level since July 30 and U.S. bond yields declined, some dip-buyers emerged in the Asian session on Thursday. Nonetheless, expectations of smaller interest rate cuts by the Federal Reserve could support the dollar and bond yields amid concerns over deficit spending after the election. Additionally, signs of stability in equity markets may limit further gains for gold. Traders are now looking to flash PMIs for new insights into the global economy and short-term market direction.

Caution is advised for gold bulls, as a breakdown below a short-term ascending trend-channel support has occurred, signaling a potential trigger for bearish traders. Negative oscillators on hourly charts indicate that the path of least resistance for gold prices is downward. However, it may be wise to wait for a convincing break below the $2,700 level before anticipating further declines. If this happens, the XAU/USD could accelerate its drop towards the $2,685 intermediate support, eventually targeting the strong horizontal resistance level around $2,672-2,670.

Conversely, the ascending channel support breakpoint at around $2,730-2,732 now acts as an immediate resistance. The next significant resistance is around the $2,750 mark; if surpassed, gold prices could resume their uptrend and potentially rise towards the $2,770-2,775 range before attempting to break the $2,800 level.

Paraphrasing text from "FXSTREET" all rights reserved by the original author.