Spot gold prices rebounded after hitting lows during Asian and European trading hours on Wednesday (October 22). Spot gold dipped as low as $4,004.46 per ounce in early Asian trading but recovered to around $4,150 during European trading. Currently, spot gold is trading around $4,145 per ounce, up about 0.5%. Precious metals prices edged higher on bargain hunting, driven by concerns about the impact of the US government shutdown and ongoing worries about unsustainable global government debt.
Growing market expectations that the Federal Reserve will cut interest rates by another 25 basis points at its October policy meeting could boost gold prices. Lower interest rates could reduce the opportunity cost of holding gold, supporting the non-yielding precious metal.
On the other hand, trade tensions appear to be easing as China and the US aim to reach an agreement before the November 1 tariff deadline. This could weaken safe-haven demand.
Looking ahead, traders will be closely watching September’s US Consumer Price Index (CPI) inflation data due to a data shortage caused by the government shutdown.
September’s headline and core CPI are expected to increase by 3.1% year-over-year. Higher-than-expected US inflation data could boost the US dollar and put pressure on dollar-denominated commodity prices in the short term.
Market Dynamics
- The US government shutdown entered its fourth week, with the Senate failing for the 11th time on Monday to pass a House-passed appropriations bill aimed at funding the government and ending the ongoing shutdown. The vote was 50-43, largely along party lines.
- US President Trump threatened to impose 100% tariffs on China last week, but softened his stance over the weekend, stating that high tariffs on China were unsustainable and expressing a willingness to improve relations with China.
- Trump predicted late Tuesday that his upcoming meeting with the Chinese President would result in a “good deal.” However, he also acknowledged that the highly anticipated talks might not take place.
- U.S. Treasury Secretary Scott Besant will meet with Chinese officials before the US-China trade talks to discuss ways to ease trade tensions.
- Trump said late Tuesday that he did not want to engage in “pointless talks” with Russian President Vladimir Putin about the war in Ukraine. The BBC reported that the scheduled in-person meeting has been postponed.
- According to the Chicago Mercantile Exchange (CME) FedWatch tool, traders currently see a near 99% probability of another Federal Reserve rate cut next week, with another cut possible in December.
Gold Maintains a Positive Tone in the Long Term
Gold prices are trading in positive territory today. On the daily chart, the precious metal’s positive outlook remains intact, with prices holding above the key 100-day exponential moving average. However, with the 14-day relative strength index (RSI) pointing toward its midline, indicating neutral momentum in the short term, further consolidation or a brief sell-off cannot be ruled out.
On the bullish side, a sustained break above $4,140 (October 15 high) could pave the way for further gains towards $4,330 (October 16 high). Further downside, the next resistance level lies between $4,370 and $4,380, representing the all-time high and the upper Bollinger Band.
On the bearish side, the psychological level of $4,000 serves as key support. Further downside support lies at $3,947 (October 10 low), with the next target at $3,838 (October 3 low).
