XAU/USD is consolidating around $2640, moving sideways with little volatility. This is happening even though the market is still digesting the U.S. employment report that was released last Friday. The report was stronger than expected, with 254,000 new jobs created outside the agricultural sector (the well-known "payroll"), while expectations were only 140,000. Additionally, hourly wages also rose more than anticipated, reinforcing the idea that the U.S. economy remains strong.
Here’s the key point: with the economy still running hot, the Federal Reserve (Fed) is in no rush to cut interest rates, which somewhat dims the allure of gold as a safe-haven asset. The market is projecting a 25 basis point rate cut in November or December, but nothing is set in stone yet.
Geopolitics driving gold
On the other hand, what’s supporting gold demand is the escalation of tensions in the Middle East. Iran launched missiles towards Israel, and naturally, Israel’s response was promised with equal intensity. This conflict introduces uncertainty into the market, and as always, when global tensions rise, gold becomes more attractive as a safe haven.
CFTC and gold positions
Looking at the numbers from the CFTC (U.S. Commodity Futures Trading Commission), the net speculative positions in gold dropped from 315,400 to 299,900. This move suggests that investors are pulling back a bit, possibly waiting to see what happens both with interest rates and the situation in the Middle East.
Technical analysis
From a technical perspective, Bollinger Bands show a slight attempt at stabilization, with the price range narrowing. The MACD indicator is giving a sell signal, suggesting a potential short-term decline, while the Stochastic is nearing its bottom, indicating that gold might be becoming undervalued in the short term.
Resistance levels: 2655.00, 2670.00, 2685.56, 2700.00
Support levels: 2640.00, 2623.84, 2613.83, 2600.00
Trading strategy
Short position: If the price breaks below 2640.00 decisively, a short position could be considered with a target at 2613.83. Set a Stop Loss at 2655.00 to limit risk.
Long position: If gold holds 2640.00 as support and breaks above 2655.00, then a long position may be opened, with a target at 2685.56. In this case, set a Stop Loss at 2640.00.
The time frame for these trades should be short, around 1 to 2 days.
Conclusion
In summary, gold is in a "wait and see" phase. On one hand, the U.S. economy remains strong, which theoretically diminishes gold’s attractiveness. On the other hand, geopolitical tensions could inject volatility and push prices higher. Keep an eye on the technical levels and be ready to act quickly as the market takes a more defined direction.