GOLD Analysis
Afternoon: Gold Reaches New High Amid Middle Eastern Tensions and U.S. Election Uncertainty
Highlights:
- Gold surged to new highs amid escalating Middle Eastern tensions and U.S. election uncertainty.
- U.S. budget deficit hit $1.833 trillion, and traders expect a 99% chance of a Fed rate cut in November.
- ECB lowered rates by 25 basis points, reinforcing global dovish sentiment and boosting gold prices.
Overview:
Gold prices surged to a new high, nearing $2,750, driven by escalating geopolitical tensions in the Middle East and uncertainties surrounding the upcoming U.S. presidential election. As opinion polls show a tight race between former President Donald Trump and Vice President Kamala Harris in key battleground states, the financial markets are reacting with caution. Investors are flocking to safe-haven assets like gold as the election date draws closer, with less than three weeks remaining before the November 5 election.
Adding to the uncertainty, the U.S. budget deficit for fiscal year 2024 soared to $1.833 trillion, marking the largest deficit since the COVID-19 pandemic, according to the U.S. Treasury Department. Interest payments on the federal debt have also reached a historic $1 trillion, further raising concerns about the fiscal health of the United States. This alarming fiscal environment has reinforced expectations that the Federal Reserve will cut interest rates in November, with CME's Fedwatch tool showing a 99% probability of a rate reduction.
On the global stage, the European Central Bank (ECB) lowered interest rates by 25 basis points last week, adding to the already dovish sentiment from major central banks worldwide.
Key Drivers of Gold’s Rally:
- Middle Eastern tensions and U.S. election uncertainty fuel demand for safe-haven assets.
- Federal Reserve rate cut expectations and U.S. fiscal concerns further boost gold prices.
Technical Overview:
- Gold$: Support at $2705, resistance at $2750.
- Gold MCX: Support at ₹77,300, resistance at ₹78,200.
Market Outlook:
The upcoming U.S. election and potential further escalation in Middle Eastern conflicts are likely to continue supporting gold’s bullish momentum. Traders will also be keeping a close eye on key economic releases, including the German Producer Price Index (PPI) and the U.S. Conference Board's Leading Index. The outlook for gold remains positive, with geopolitical uncertainty and central bank policies favoring higher prices in the near term.
Support and Resistance Levels:
