GOLD volatility, monetary policy and political riskThe global OANDA:XAUUSD went through a volatile trading session on Tuesday, as prices fell more than $50 in the North American session before recovering around $30, ending the day in the green. As of Wednesday morning, November 12, spot gold stood at around $4,128/ounce, up around $2 on the day.
The main drivers of this development came from two opposing factors: the prospect of the Federal Reserve (Fed) possibly cutting interest rates in December, and capital withdrawals from gold ETFs after a long rally.
Policy pressures and labor market signals
U.S. private payrolls data, according to preliminary estimates from ADP Research, showed a weekly average of 11,250 job cuts in the four weeks ended October 25. The weaker-than-expected figure sent the dollar to a low of 99.29, giving gold a chance to rebound.
The move comes just as Washington is about to end its longest government shutdown in history, which has stalled the release of economic data. Investors are hoping the reopening of the government will quickly bring a wave of pent-up data that will help better determine the true state of the U.S. economy.
“As the government reopens, we’re going to start seeing more cracks in the economy,” said Marc Chandler, chief strategist at Bannockburn Global Forex. This expectation reinforces the belief that the Fed will begin its easing cycle in December. According to the CME FedWatch tool, the probability of a rate cut has risen to 64%, while Fed Governor Milan hinted at the possibility of a 50 basis point cut due to a weak labor market and slowing inflation.
ETF Profit Taking, Gold Temporarily Adjusts
However, gold’s rally was capped by profit-taking in the ETF market. Bloomberg data shows gold ETFs have seen four straight weeks of outflows, after eight weeks of net buying. “Every 1% move in the gold price translates into about 10 tonnes of ETF outflows,” said Michael Haigh, head of FIC research at Société Générale.
The reversal reflects investors’ defensive sentiment after gold peaked at $4,380 an ounce in mid-October, a new record high amid political uncertainty and expectations of lower interest rates. Still, safe-haven demand was strong enough to help prices recover to $4,126.77 by the end of Tuesday’s session, up 0.3%.
US Politics: A lull ahead of data
The US Senate has passed a deal to reopen the government, while the Republican-controlled House is expected to approve it this week, before it goes to the White House for President Trump to sign into law. The reopening of the government not only ends the government shutdown but also sets the stage for a new cycle of data releases, including official jobs and inflation reports.
Medium-term outlook: Gold demand remains strong
Despite short-term volatility, fundamentals remain supportive of gold. The precious metal has risen more than 55% year-to-date, on track for its biggest gain since 1979. “The medium-term support from global easing to central bank demand remains intact,” said Christopher Wong, a strategist at OCBC.
Summary
The gold market is operating in a cycle of monetary policy expectations and geopolitical safe-haven sentiment. As the Fed moves closer to easing and delayed data looms, price volatility is likely to remain high.
However, with sustained central bank buying and global risks remaining intact, gold remains a strategic asset in a reshaping global financial landscape.
Technical analysis OANDA:XAUUSD
Gold prices are maintaining a short-term uptrend channel formed from the October bottom. After a deep correction around $3,970 – $3,850/ounce (corresponding to the Fibonacci levels of 0.382 and 0.5), the price has bounced back and is currently trading around $4,123, close to the technical resistance zone of Fib 0.236 at $4,128.
The moving average (MA21) is currently at $4,055, acting as a dynamic support zone in the short term. The recent candlestick structure shows that the bullish momentum is being consolidated with a series of higher lows, while the RSI has recovered towards 55, confirming that the bullish momentum is regaining the upper hand.
If gold holds above the $4,055 zone, the next upside targets are:
• Near resistance: $4,216 – $4,220 (psychological level and 0.236 Fibonacci resistance zone).
• Extended resistance: $4,308 – $4,380 (historic old peak zone).
On the contrary, if the price loses $4,055, the $3,972 – $3,846 zone will become the main support zone to watch, corresponding to the lower boundary of the current uptrend channel.
The overall trend remains bullish, provided the $4,055 support zone holds. The current phase is a recovery accumulation phase, which could open up a further rally towards $4,300 if US economic data continues to be weak and the Fed reinforces easing expectations.
SELL XAUUSD PRICE 4201 - 4199⚡️
↠↠ Stop Loss 4205
→Take Profit 1 4193
↨
→Take Profit 2 4187
BUY XAUUSD PRICE 4090 - 4092⚡️
↠↠ Stop Loss 4086
→Take Profit 1 4098
↨
→Take Profit 2 4105
