The price of gold (XAU/USD) continues to decline for the second consecutive day today, Tuesday, amid the recovery of the US dollar, rebounding from its lowest level since September 20, which it touched yesterday, pushing gold to its lowest level in almost two weeks, around $1,962.
I believe that the lack of significant developments in the Gaza conflict and the global agreement not to escalate it to other countries contribute significantly to the outflow of liquidity and investors away from gold, which is considered a haven and boosts risk appetite.
However, economic uncertainty, especially in China and Europe, still dominates the markets, and we can see this from the generally weak trading in the stock markets, which provides some short-term positive support for the gold price.
This comes in conjunction with the belief of investors and their growing conviction that the Federal Reserve has finished its series of interest rate hikes, which could lead to a new decline in short-term US Treasury bond yields and, therefore, should reduce the losses of gold, which does not yield any returns. This, in turn, requires caution for traders when making selling deals today.
I believe the decline in gold is related to the rebound in the yields of 10-year US Treasury bonds from their lowest level in six weeks, which they reached on Friday. The current long-term bond yield is now at 4.64%. This positive momentum in bond yields strengthens the US dollar, which is currently trading near 105.60.
This comes after gold prices saw a slight increase in response to improved investor sentiment amid expectations that the US Federal Reserve may halt its monetary tightening, supported by weak employment data from the United States.
The latest report from the World Gold Council (WGC) reveals that central banks around the world acquired 337 metric tons of gold in the third quarter of this year. It is worth noting that emerging markets were among the largest buyers, reflecting the ongoing trend of diversifying away from the US dollar.
In my view, traders and investors will be closely watching this week the Chinese trade balance data for October, which was released this morning, showing an increase to $81.95 billion from $77.71 billion previously, which will boost short and medium-term demand for gold.
This may lead to a short-term bullish correction before a strong gold price decline returns.
Markets are also eagerly awaiting speeches by members of the Federal Open Market Committee, including the appearance of Federal Reserve Chairman Jerome Powell on Wednesday and Thursday, to get signals about the future path of interest rate hikes.
This will play a key role in driving demand for the US dollar in the short term. Along with geopolitical factors and high-risk appetite, which could provide new momentum to the gold price in either direction.
I believe that gold will remain inclined towards negativity with some short-term bullish corrections amid rising risk appetite in the markets and the significant anticipation of political events and economic data this week.