XAUUSD – Daily Chart
The price of gold touched highs near the $2,800 level but has since collapsed to $2,555. That level coincides with the uptrend resistance line that was broken significantly in September. This is now a crossroads area for the precious metals complex.
Victory for Trump in the recent election has removed a large amount of war premium as the former President aims to take a tougher stance against Iran and also to broker a peace deal between Russia and Ukraine.
After gaining ground on the Federal Reserve’s planned rate cut, the price of metals has slumped, even as US inflation data supported the case for another cut next month. Trump’s victory has investors expecting a phase of US economic strength and that has boosted the price of the dollar.
Wednesday’s consumer price data from the United States was lower, in line with expectations. However, the annualised three-month core rate showed some strength. Overall, the latest numbers supported another Fed rate cut in mid-December, with traders pricing in the likelihood at more than 80%. Lower borrowing costs are generally good for gold because it doesn’t pay a yield.
The World Gold Council published data for gold demand during the third quarter this week with over-the-counter (OTC) transactions, rising by 5% year-on-year, reaching a record level for the period. The increase in demand was largely driven by gold exchange-traded funds, which recorded inflows for the first time in 10 quarters. As a result, investment demand more than doubled when compared to the same quarter last year, although purchases of bars and coins were lower. Jewellery demand fell to its lowest level in a third quarter since 2000, except for the pandemic year.
“In the first three quarters, demand for Gold, including OTC transactions, was 3% above the previous year’s level. Investment demand exceeded the figure for the previous year despite somewhat lower purchases of bars and coins, because Gold ETFs recorded significantly fewer outflows. Jewellery demand and central bank Gold purchases were down year-on-year after three quarters. However, the latter are on a par with 2022, which ended with a record level. For the year as a whole, the WGC expects investment demand to be higher than in the previous year,” Commerzbank analysts said.