The Israeli-Palestinian conflict in the Middle East continues to intensify, and geopolitical uncertainty continues to affect the gold market. This undoubtedly boosted the risk aversion sentiment in the market. Gold once exceeded the USD2,000, but the price later fell slightly. 

More important, from the speech of Fed Chairman Jerome Powell at the New York Economic Forum, where he sidestepped a commitment to a specific policy path when asked by reporters but did not indicate his preference for raising interest rates. Powell reiterated that inflation remains too high and highlighted the data of September as less encouraging. However, he pointed out that the effects of monetary policy are emerging and will take time to work. Powell's speech was interpreted as dovish by the market, and speculators in the market subsequently bet on the US dollar falling, driving gold to rise in response to panic. 

However, Bank of America economists have adjusted the timing of the Fed's next rate hike from November to December. It even said that raising interest rates in December may not be a dilemma, and the Fed is likely not to raise interest rates ahead of schedule, or to stop raising interest rates completely. This is also a reasonable prediction given that Fed officials last week did not give sufficient reasons for raising interest rates in November. If the Federal Reserve stops raising interest rates for the rest of this year, and geopolitical tensions may be difficult to ease, gold will still have a strong supporting role in the current environment.  

Gold's daily chart shows a breakout of an early double top, laying the foundation for the next target. However, the technical indicator RSI has exceeded 70, indicating that gold has become technically overbought for the first time since March. If gold experiences a technical pullback, USD1,950 - 1,960 is the first support level.

In addition, buyers may lose confidence in the short term and are expected to fall further to USD1,880 - 1,900 if gold prices close below this support area. On the upside, gold prices may face strong resistance at the USD2,000 level. If gold prices rise above this level, buyers could technically take action, pushing gold prices further towards USD2,040. Overall, it will be more advantageous to stay bullish on the callback. A more ideal entry point is around 1,880, and investors may consider buying at this level.

Hugo Leong

Gold Analyst of Hantec Group