The perfect storm keeping gold in an uptrend still continues:
– Geopolitical risks remain high, especially in the Middle East, with Israel’s recent strike inside Iran. It is unclear if Iran will retaliate directly or through its proxies.
– Rate cuts are ongoing globally. As inflation numbers approach target levels, more cuts are expected from the US, EU, UK, and many other countries, including China. Japan is an exception, but recent loss of ruling coalition after last week’s election might have reduced the likelihood of new hikes for now.
– US election results are due next week, with surveys shows a close race in which Trump is expected to come out ahead according to market trends. Should Trump win, his proposed economic policies are likely to increase the deficit due to tax cuts and potentially boost inflation with tariffs, both of which would support gold prices. Additionally, a Trump presidency may allow Israel more latitude in the Middle East, possibly heightening geopolitical risks.
While many of these developments support gold prices, much of this may already be priced in. Markets often “buy the rumor and sell the news,” so there is a risk of a correction in the coming weeks. However, the general direction for gold remains clear for now.
(XAUUSD 4H Chart)
On the 4-hour chart, a strong uptrend is in place, with the 144-bar exponential moving average supporting this trend channel since early August. Following the strong ADP and claims data, the gold price was rejected from the upper line of the channel and fell to its midpoint. The current midpoint is at 2745, which could act as a pivot point for short-term direction. If XAUUSD holds above this level, another attempt to reach the upper levels of the channel may be likely today or early next week. However, if today’s jobs report leads gold to drop below the 2745 support, a move toward the lower line of the trend channel and the 144-bar exponential moving average could begin.
