• The price of gold continues to hit novel all-time highs amid US election uncertainty and unrest in the Middle East.
• The dynamics appear to be unaffected by elevated U.S. Treasury yields and the rising dollar.
• Traders are now eagerly awaiting critical US macro data before positioning for further gains.

The price of gold (XAU/USD) is falling after hitting a novel record high early in the European session on Wednesday and is currently hovering around $2,780, still up 0.25% on the day. Safe-haven demand resulting from the risk of further escalation of geopolitical tensions and uncertainty around the US presidential election are proving to be key factors that continue to support the precious metal.

Moreover, falling U.S. Treasury yields are keeping U.S. dollar (USD) bulls on the defensive below the three-month high set on Tuesday and providing additional support to the gold price. That said, growing acceptance that the Federal Reserve (Fed) will continue with smaller interest rate cuts amid a still resilient economy is keeping bulls from making novel bets around the underperforming yellow metal in a mildly overbought environment.

Traders also seem reluctant and prefer to wait for critical macro releases from the US, which should provide novel clues on the Fed interest rate outlook and, therefore, provide a significant boost to the gold price. Nevertheless, the fundamental backdrop appears to be tilting in favor of the XAU/USD bulls, suggesting that any significant corrective decline could still be viewed as a buying opportunity and is likely to remain narrow.

Daily Digest Market developments: The upward trend in gold prices remains uninterrupted pending US macro data

• Former Republican US President Donald Trump and Democratic Vice President Kamala Harris are locked in a tight race for the White House, fueling political uncertainty and sending the price of gold to a novel record high on Wednesday.
• On Tuesday, almost 100 people were killed in an Israeli attack on an apartment building in northern Gaza. This came days after the Israeli military confirmed on Sunday that its air force had carried out a precision strike against Hamas militants.
• This situation increases the risk of further escalation of tensions in the Middle East and contributes to the bidding tone around the safe-haven XAU/USD, offsetting the recent rise in US Treasury yields and the US dollar.
• Incoming macro data from the US suggested that the US economy remains on sturdy foundations, confirming market expectations for less aggressive policy easing by the Federal Reserve and the prospects for smaller interest rate cuts.
• The Conference Board reported Tuesday that the U.S. consumer confidence index posted its biggest monthly gain since March 2021, rising to a nine-month high of 108.7 in October, up from an upwardly revised level of 99.2 in September.
• This reflected optimism in business and labor market conditions, overshadowing the disappointing JOLTS job vacancies and employee turnover report, which showed vacancies fell to their lowest level in more than 3.5 years in September.
• Additionally, concerns about deficit spending following the November 5 U.S. presidential election are keeping U.S. bond yields high near multi-month highs, but doing little to impede further positive price movement for the precious metal.
• Traders now look to Wednesday’s U.S. economic report, which includes the release of the ADP private sector jobs report and the Advance GDP print, which is expected to show the economy grew at an annual rate of 3% in the third quarter.
• Market attention will then turn to the US personal consumption expenditures (PCE) price index – the Fed’s preferred measure of inflation – on Thursday and the closely watched nonfarm payrolls (NFP) report on Friday.

Technical Outlook: Gold price slightly overbought RSI on the daily chart warrants bulls’ caution

From a technical perspective, an overnight break above the weekly trading range was seen as fresh stimulus for bulls. The subsequent move higher lifts the gold price to the rising trendline resistance stretching since early July, now established near the $2,780-$2,785 area, which may present a sturdy barrier in the face of a slightly overbought relative strength index (RSI) on the daily chart. However, continued strength above the mentioned barrier could push the XAU/USD rate towards the $2,800 level.

On the other hand, any significant corrective slide currently appears to be finding decent support near the trading range breakout point around $2,750. Some follow-on selling could make the gold price vulnerable to further declines towards intermediate support at $2,732-2,730 on the way to the $2,715 area. This is followed by the $2,700 mark which, if broken, should pave the way for a decline towards the next appropriate support near the $2,675 zone on the way to the $2,657-$2,655 region.