On Wednesday (October 23rd), spot gold prices fell more than 1% after reaching a historic high. Analysts pointed out that the strengthening of the US dollar and US Treasury yields, coupled with the easing of tensions in the Middle East, were the main reasons for the sharp drop in gold prices on Wednesday. In addition, the recent surge in gold prices has led to overbought technical indicators, and some investors have chosen to take profits.

Spot gold closed down $33.44, or 1.22%, at $2715.24 per ounce on Wednesday. Spot gold hit a record high of $2758.45 per ounce on Wednesday.

Bob Haberkorn, senior market strategist of RJO Futures, said that there were some profit taking transactions in the market, and the yield of treasury bond was rising. Considering the trend of yield, gold would be difficult to rise.

The dollar index is close to a three-month high, making gold less attractive to other currency holders, while the yield of US treasury bond bonds climbed to a three-month high.

Ole Hansen, head of commodity strategy at Shengbao Bank, pointed out that this is related to the uncertainty brought by the US election and the rising debt burden in the US. "They also have to issue billions of dollars of debt to the relatively light and tight market before the election

Christian Borjon Valencia, an analyst at FXStreet, pointed out that as the yield of US treasury bond bonds climbed, the US dollar hit a two month high, and the gold price plummeted from a historical high of 2758 US dollars/ounce on Wednesday. The rise in US Treasury yields reflects people's concerns about an increase in deficit spending if Trump is elected president.

The yield of the US 10-year treasury bond bond was 4.248%, up 4 basis points. The US dollar index, which measures the performance of the US dollar against six other currencies, rose 0.42% to 104.50.

Since the Federal Reserve cut the interest rate by 50 basis points on September 18, the yield of the US 10-year treasury bond bond has climbed by more than 65 basis points. People worry that if Trump returns to the White House, his policies may lead to inflation.

Thomas Hayes, Chairman of Great Hill Capital in New York, said: "The rise of treasury bond bond yield indicates that the government supporting growth may come to power, and the market has some concerns about deficit spending."

As shown by most gambling websites, investors seem to believe that former President Trump may defeat Vice President Harris. As the November 5th US election approaches, investors are seeking refuge in light of this possibility. Investors are somewhat concerned that Trump's deficit spending, use of tariffs, and major illegal immigration deportation programs may lead to a new round of inflation.

Valencia added that at the same time, the Middle East issue has eased, which has also hit commodities such as crude oil. Crude oil prices fell by 0.77% to $70.69 per barrel.

News of ceasefire in the Middle East

According to a report by NBC on Wednesday, an Israeli official told NBC that Israeli officials are considering Egypt's proposal for a small-scale ceasefire with Hamas in order to push for a larger ceasefire agreement. Earlier, US Secretary of State Antony Blinken arrived in Israel to resume diplomatic efforts.

The official, who declined to be named, said that the Israeli security cabinet has discussed Egypt's proposal for a two-week ceasefire in Gaza. Egypt's proposal calls for the release of only six Israeli hostages in exchange. This is a suggestion put forward by Hassan Mahmoud Rashad, the new head of Egypt's intelligence agency who took office last week.

Brinken arrived in Israel early Tuesday local time as part of his visit to the Middle East, aiming to restart the ceasefire negotiations and end the escalating regional conflict after the death of Hamas leader Yahya Sinwar.

The Israeli official said, 'People's idea is that reaching a big ceasefire agreement is constantly facing challenges, so a small agreement can be reached first to drive momentum.' The official warned that although Israeli leaders have discussed this proposal, it has not yet been approved.

Pay attention to Thursday's US data

Investors are paying attention to the economic data from the United States on Thursday, which may provide new impetus for gold price trading.

The number of initial jobless claims in the United States for the week of October 19th is expected to slightly increase from 241000 to 242000.

S&P Global will release the US Purchasing Managers' Index (PMI) data for October. It is expected that the manufacturing PMI will rise from 47.3 to 47.5 in October, while the service PMI is expected to fall from 55.2 to 55.

How to trade gold?

Analyst Christian Borjon Valencia pointed out that gold prices sharply fell on Wednesday, forming a bullish swallowing candle chart or "outside day" pattern. If confirmed, gold prices may experience a correction after rebounding 5.96% since October 10th.

From a momentum perspective, sellers are accelerating their pace. The Relative Strength Index (RSI) has dropped significantly from an overbought state, opening the door for further decline.

Valencia stated that it is seeking a pullback in gold prices as the daily closing price falls below $2719 per ounce. The first support level is the 38% Fibonacci retracement level of $2699 per ounce, followed by the 50% Fibonacci retracement level of $2681 per ounce and the 61.8% Fibonacci retracement level of $2662 per ounce.

Valencia added that on the other hand, if the gold price breaks through $2750 per ounce, the next target will be the historical high of $2758 per ounce, followed by $2800 per ounce.