On Wednesday (October 29), spot gold rebounded after a slight dip during the Asian and European sessions, climbing to the psychological level of $4,000. It is currently up 1.64%, trading around $4,019.34. This temporarily ended a three-day losing streak – gold prices had touched a more than three-week low in the previous trading session. Market expectations that the Federal Reserve will lower borrowing costs later today and cut interest rates again in December continue to rise, driving funds into the non-interest-bearing asset, gold.

Trade easing constrains gold prices

On Tuesday, signs of progress in trade talks between the US and China eased market concerns about a full-blown trade war between the world's two largest economies, directly dragging safe-haven asset gold down below the $3,900 mark, hitting a more than three-week low.

Federal Reserve meeting: injection of funds and rate cut

Market expectations that the Federal Reserve would cut interest rates by 25 basis points at its two-day meeting that concluded on Wednesday, and that there would be another rate cut in December, helped limit the decline in gold, a non-interest-bearing asset.

However, the upside potential for gold prices is likely to remain limited, as traders tend to wait for more clear clues about the Fed's rate-cutting path before confirming the end of the recent pullback after the historical peak.

The easing impact of the US government shutdown is suppressing gold prices.

On Tuesday, the Senate failed for the 13th time to pass a Republican-backed appropriations bill to end the government shutdown, further highlighting the gridlock in Congress; meanwhile, a U.S. federal judge issued a preliminary injunction prohibiting the Trump administration from firing federal employees during the current shutdown.

Geopolitical disturbances continue to support gold prices.

The United States announced new restrictions on Russia's two largest oil companies, and the White House simultaneously canceled a planned meeting between Trump and Russian President Vladimir Putin in Budapest. Geopolitical risks persist, potentially providing continued support for gold as a safe-haven asset.

Summarize:

Amidst looming risks from key events, some position adjustments have injected positive momentum into the US dollar. Furthermore, signs of easing trade tensions between the world's two largest economies may limit the gains of gold, a safe-haven asset.

However, as traders are likely to wait for the FOMC meeting results, the upside potential for gold remains limited.

Therefore, before confirming that the recent sharp pullback after hitting a historical peak at the beginning of the month has ended and before setting up a meaningful upward trend for gold, waiting for strong follow-up buying is still a more prudent trading strategy.

Technical Analysis:

As analyzed in yesterday's article on the daily gold chart, the price of gold was expected to rebound from around 3899. The price eventually hit a low of 3886 before rebounding as predicted. The daily gold chart shows that the price of gold started its rebound at the 0.618 Fibonacci retracement level.


(Spot gold daily chart)

The 4-hour chart for spot gold shows that it has broken through the downward pressure line and is currently consolidating around the 4000 level. After a brief consolidation, it may reach a high of 4060.


(Spot gold 4-hour chart)

As can be seen from the intraday chart, the current resistance levels are around the previous low of 4025 and the previous support level of 4060. Support is currently located near the upward trend line.


(Spot gold intraday chart, source: EasyForex)

At 17:50 Beijing time, gold was trading at $4,027 per ounce.