After hitting consecutive historical highs, gold fell from around $2750 on Wednesday as traders took profits. As of the time of writing, spot gold fell below $2720/ounce, dropping nearly $40 from the daily high, a drop of over 1% within the day. Spot silver plummeted 3% on the day.

Amid ongoing Middle East conflicts and increased uncertainty surrounding the U.S. election, the demand for safe-haven assets has been a major driver of gold's recent rebound. Although opinion polls show that former U.S. President Trump and Vice President Harris are neck and neck, the market is betting on an increased probability of Trump's victory, which is seen as a threat to stable geopolitical prospects.

Another factor driving gold higher may be the attention on the 2024 summit of the BRICS countries. Members, especially Russia, are seeking to find a currency as an alternative to the dollar's dominant status, with gold-backed currencies being touted as a viable alternative currency.

However, the reason limiting the rise of precious metals is the global bonds' sharp decline, as investors believe that the pace of global interest rate cuts is slower than previously expected.

This adjustment in prospects is most pronounced in the United States. Traders are now more moderate in their expectations for the Fed's rate-cutting path. As expected interest rates and the U.S. dollar are likely to remain relatively high, gold as a non-yielding asset has lost some of its luster.

Prashant Newnaha, senior interest rate strategist for the Asia-Pacific region at TD Securities, said, "This week, there has been an intensified sell-off of US ​​bonds because the market is concerned that if the Federal Reserve loosens its policy against a strong economic backdrop, it could reignite inflation."

In addition, he also pointed out, "The probability of Trump winning the election continues to increase, weakening the market's expectation of further interest rate cuts by the Federal Reserve in 2025. The possibility of the Federal Reserve staying on the sidelines in the first six months of next year cannot be ruled out."

Fxstreet analysts pointed out that the upward trend in gold paused and fell below the $2750 integer mark. The Relative Strength Index (RSI) is overbought, indicating the risk of a pullback, and advising long positions not to increase. If the RSI closes in the neutral range, it will be a signal for long positions to close out and turn short, as a deeper correction may be imminent. Support levels are at $2700 and $2685 (September high).

However, the overall strong upward trend of gold indicates that any corrections may be temporary. Subsequently, a broader bull market trend will resume. Gold is steadily rising in all time frames (short, medium, and long term), and following the motto "the trend is your friend," gold is likely to have more upside potential. If it can stabilize above $2750, long positions may target the key level of $3000.

Editor/Somer