#Middle East Situation##Gold Technical Analysis#24K99 News On Tuesday, October 8, spot gold experienced a sharp pullback, with the price closing down more than $20 and falling to the $2,600 per ounce level at one point during the session. FXStreet analyst Christian Borjon Valencia wrote on Wednesday analyzing the gold price trend.
Valencia pointed out that on Tuesday, with a strong U.S. employment report and news of a call for a ceasefire between Hezbollah and Israel, the gold price dropped significantly. Signs of easing tensions in the Middle East opened the door for traders to lock in profits.
Valencia stated that due to hopes of a ceasefire between Israel and its neighboring countries, the gold price dropped to a daily low of $2,604 per ounce on Tuesday. As Hezbollah supported ceasefire efforts, safe-haven demand weakened while rising U.S. Treasury yields further suppressed the gold price.
Spot gold closed down $20.44 on Tuesday, a decrease of 0.77%, at $2,621.84 per ounce. The lowest price during the session reached $2,604.50 per ounce.
Valencia wrote that the U.S. stock market is still supported by improved market sentiment. Signs of potential conflict resolution will prompt funds to flow from safe-haven assets to higher-risk assets. A senior Hezbollah official stated on Tuesday, "Hezbollah supports efforts for a ceasefire in Lebanon." This led to selling pressure on gold, with the price plummeting over $35 at one point to the daily low of $2,604 per ounce.
Valencia added that the sharp rise in U.S. Treasury yields has put pressure on gold as a non-yielding metal. The U.S. 10-year benchmark bond yield remains above 4%, rising over 6 basis points this week following the release of the September non-farm payrolls report last Friday.
Interest rate traders have adjusted their expectations for the Federal Reserve's next move. According to CME's "FedWatch Tool," the probability of a 25 basis point rate cut by the Fed in November is 85.3%. Meanwhile, the possibility of a 50 basis point cut is 0%, but the probability of keeping rates unchanged has risen to 14.7%.
The second-in-command of Hezbollah speaks out on the ceasefire.
According to Reuters, the second-in-command of Hezbollah, Naim Qasim, said in a speech broadcast on October 8 that Hezbollah supports efforts to achieve a ceasefire in Lebanon. However, it is noteworthy that for the first time he did not mention that the ceasefire agreement in Gaza is a prerequisite for Hezbollah to stop firing at Israel.
Qasim said that Hezbollah supports efforts by the organization's ally, Lebanese Speaker Nabih Berri, to achieve a ceasefire.
In recent weeks, with Israel launching ground operations and some high-level Hezbollah leaders, including Nasrallah, being killed, the conflict has escalated continuously.
In a 30-minute television speech, Qasim said: "We support Berri's political activities initiated in the name of a ceasefire. In any case, once diplomatic means can achieve a ceasefire after the ceasefire issue takes shape, we can discuss all other details and make decisions."
How to trade gold?
Valencia pointed out that the price of gold fell below $2650 per ounce on Tuesday, which may open the door for further pullback. After briefly testing the region of $2605 per ounce, the gold price regained some lost ground. However, so far, gold has not been able to gain momentum and break through the $2650 per ounce level.
Momentum indicators show that the Relative Strength Index (RSI) has fallen sharply, and the bears are intensifying their efforts.
Valencia said that as gold prices fell below the September 30 low of $2624 per ounce, they will still test the $2600 per ounce level. If it weakens further, the next support will be the 50-day Simple Moving Average (SMA) at $2534 per ounce.
(Spot gold daily chart source: FXStreet)
On the other hand, Valencia added that if the daily closing price of gold is higher than $2650 per ounce, then the price of gold needs to break through $2670 per ounce to challenge the high of $2685 per ounce so far this year. The next target will be the key level of $2700 per ounce.
