On Tuesday (October 29th), the gold market was supported by uncertainty before the US elections and tensions in the Middle East. Spot gold prices (XAU/USD) rebounded to $2754 per ounce in early trading, just one step away from last week's historic high of $2758.45. Gold, as a safe haven asset, has once again attracted the attention of investors, who are cautious about the upcoming US economic data this week, which may provide new guidance for the Federal Reserve's interest rate hike path. The current high inflation level and possible interest rate adjustments by the Federal Reserve have further highlighted the safe haven nature of gold.

Geopolitics and election uncertainty drive up risk aversion demand

The recent geopolitical conflicts in the Middle East, the upcoming election results in the United States, and the uncertain attitude of the Federal Reserve towards interest rate policy have brought great uncertainty to the market. As one of the world's most popular safe haven assets, gold has attracted a large influx of funds. The tight election situation in the United States, coupled with the severe warning issued by the United States against Iran, has significantly increased market volatility before the election results are announced.

In addition, although global inflationary pressures still exist, the decline in Chinese gold consumption has also had a certain impact on global gold demand. The latest data from the China Gold Association shows that in the first three quarters of 2024, China's gold consumption decreased by 11.18% year-on-year, and high gold prices suppressed the purchasing demand in the jewelry market. However, with the tense situation in the Middle East and the uncertainty of the US election prospects, the safe haven appeal of gold seems to have surpassed the pressure brought by some weak physical consumption.

Approaching high levels, short-term bullish signals are evident

From a technical perspective, the price of gold is approaching historical highs and facing pressure in the resistance zone of $2758 per ounce. If the gold price breaks through the upward resistance of $2758, it will constitute a bullish signal and may further impact the $2782 or even $2800 mark.

After last week's price breakthrough, gold showed a clear strength, although the bullish momentum slowed down during the week, the relative strength index (RSI) on the daily chart is close to the overbought range. Analysts point out that if there is a pullback to the support range around $2722 in the short term, it may become a new round of entry opportunity. Otherwise, there is a high possibility that gold will continue to remain above $2758, and once it breaks through, it will test the resistance of the upward trend line over the past four months. The expected high is between $2775 and $2782.

On a daily basis, if the gold price fails to break through $2758, it may fluctuate within the range of $2735 to $2760, waiting for further market guidance. If there is a downward adjustment, attention should be paid to the support level of $2722, which is a key bearish target in the short term; If the price continues to fall below this support level, the next step may be to test the low-level support around $2700 and $2675.

The expected policies of the Federal Reserve and the dynamics of US bond yields will affect the trend

In addition to geopolitical factors, expectations of US economic data and Federal Reserve interest rate policies are also driving the short-term market for gold. The recent stable performance of US economic data has lowered market expectations for a significant interest rate cut by the Federal Reserve, while expectations for an increase in long-term interest rates may suppress the rise of gold.

Although gold may experience fluctuations this week due to updates in US macroeconomic data, overall market preference still supports its high trading. After a slight decline in US bond yields, the US dollar index remained strong last week, providing some support for gold bulls. However, due to the lack of returns on gold and the increase in holding costs caused by the strengthening of the US dollar, the upward potential of gold in the short term may also be suppressed. Therefore, investors need to remain cautious at the current high level and pay attention to subsequent data and changes in market sentiment.

The economic data such as the US JOLTS job vacancies and consumer confidence index, which will be released this week, are expected to become important references, especially for the market to speculate on the direction of the Federal Reserve's future policies. If the data is bearish on the US dollar, gold may have further opportunities to rise. On the contrary, if the data performs strongly, it will boost the US dollar and weaken the attractiveness of gold, and the gold price may come under pressure and fall in the short term.

Long short game, focus on high-level breakthroughs and support level pullbacks

Against the backdrop of increasing global uncertainty, the safe haven demand for gold prices remains strong. The gold price is fluctuating around the high of $2758. If it breaks through, it will further test the resistance above $2780. If it fails to break through, it may retest the high after gaining support at the support level of $2722. The current market is stuck between long and short forces, and the short-term trend of gold may remain volatile at a high level. Investors should pay attention to the upcoming US economic data and geopolitical dynamics this week to seize the best opportunity to enter the market.