Gold prices have climbed back above the significant threshold of $4,000 per ounce, buoyed by a surge in safe-haven demand following remarks from former US President Donald Trump. After experiencing a dip to the $3,963 region during the Asian trading session on October 30, 2023, the precious metal attracted dip-buyers and reversed its earlier decline.
Trump’s comments, made aboard Air Force One, suggested that his administration could restrict the distribution of cutting-edge artificial intelligence hardware to China. This statement has rekindled concerns about escalating tensions between the two economic powerhouses, further enhancing gold’s appeal as a safe-haven asset. Moreover, ongoing worries regarding the economic ramifications of a prolonged US government shutdown continue to support gold prices.
The US Federal Reserve’s recent hawkish stance is also influencing market dynamics. The Fed maintained its policy of high interest rates, which has helped the US dollar uphold its strength, reaching its highest level since early August. This strong dollar may cap the upside potential for gold, which does not yield interest. Traders are now awaiting the release of the US ISM Manufacturing PMI and statements from notable Federal Open Market Committee (FOMC) members for further market direction.
Trump’s statements coincided with the ongoing 33rd day of the US government shutdown, as Congress remains deadlocked over a funding bill backed by Republicans. Trump urged Republican senators to abolish the filibuster rule to end the impasse, a move that leadership has so far resisted. The uncertainty surrounding the government shutdown has raised alarms about potential economic damage, thereby reinforcing the demand for gold.
Last week, the Federal Reserve cut borrowing costs by 25 basis points for the second time this year and indicated it would halt balance sheet reductions by December, effectively ending its quantitative tightening. Despite these moves, Fed Chair Jerome Powell cautioned that further cuts in interest rates are not guaranteed.
Several influential FOMC members echoed Powell’s sentiments, pushing back against speculation of additional policy easing by year-end. This environment has kept the dollar strong and limited gold’s upward movement, creating a cautious atmosphere for bullish traders looking to capitalize on any gains.
As traders look ahead, the upcoming ISM Manufacturing PMI report will play a crucial role in shaping market expectations. Gold must break through the $4,045 to $4,050 resistance level to solidify its case for further appreciation. Should this threshold be surpassed, gold could aim for an intermediate target of $4,075 before testing the $4,100 mark.
On the downside, the recent low of $3,963 serves as a protective barrier. Should prices fall below the $3,886 zone, which is a three-week low, a rapid decline towards the $3,850 to $3,800 range may follow, with additional support levels near $3,765 to $3,760.
In conclusion, while the recent comments from Trump and ongoing government uncertainties have provided a boost to gold, the Federal Reserve’s monetary policy continues to loom large over the market. Traders remain watchful for economic indicators and signals from the Fed that could influence the direction of gold prices in the near future.
