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Gold may see a slight rebound in the short term, primarily driven by safe-haven demand amid the Israel-Palestine conflict. Upside resistance levels are at $1980 and $2000, while support levels are at $1950 and $1935. Multiple Federal Reserve officials have sent dovish signals, indicating that a pause in rate hikes in November may already be priced in by the market. Looking at CFTC positioning data and technical analysis, the medium to long-term downtrend in gold remains intact, with the potential for minor fluctuations to the upside.

In the previous week (October 16th-22nd), precious metals experienced mixed performance, with gold rising by 2.5% and silver increasing by 2.34%. Influenced by the escalation of the Israel-Palestine conflict and dovish signals from Federal Reserve official Powell, gold saw a weekly gain of over $48, ultimately settling near $1981.

Source: MacroMicro, Price Changes of Major Precious Metals and Futures from from October 16th to 22nd

On Wednesday (October 18th), the latest Beige Book survey released by the Federal Reserve revealed that economic activity in most regions of the United States has remained largely unchanged or showed minimal changes since September. Labor market tightness continued to ease, moderate price increases were observed, and the economic outlook remained stable.

Furthermore, several Federal Reserve officials have recently sent dovish signals. Powell, in his speech at the New York Economic Club, highlighted the uncertainties and risks surrounding monetary policy, including escalating geopolitical risks. While he acknowledged the necessity of rate hikes, given existing rate increases and risks, cautious decision-making is required. This implies that the FOMC might pause rate hikes in November. Recently, Harker also stated that there have been enough rate hikes and suggested maintaining the current interest rates until assessing their subsequent impact and the latest data. Bowman, in her recent remarks, mentioned less urgency regarding immediate rate hikes compared to her previous statements.

Mitrade Analyst 

The market has already priced in the expectation that the Federal Reserve will maintain high interest rates for an extended period and pause rate hikes in November. The current price support for gold primarily stems from safe-haven demand driven by the Israel-Palestine conflict, which overall benefits gold. However, as the Israel-Palestine conflict continues to drag on, the upward momentum in gold may diminish. If the conflict eases, there is a possibility of a pullback in gold prices, but based on the current situation, the likelihood of de-escalation within the year remains low.

On October 22nd local time, the Israeli Defense Minister announced a possible ground offensive in the Gaza Strip that could last up to three months, with the aim of completely eliminating Hamas. He insisted that this would be the final blow to the armed groups in the Gaza Strip. The Israel-Palestine conflict has already resulted in over 6,100 deaths and displaced more than 1.4 million people.

While the Israel-Palestine conflict has escalated further, Iran has not directly engaged despite its aspirations. Syria and Lebanon have engaged in fire exchanges with Israel. However, it is widely expected that most Arab countries will not actively involve themselves in the war. The impact of the Israel-Palestine conflict is gradually being absorbed by the market, and the future fluctuations in gold may become more rational.

In terms of CFTC positioning, recent data shows that speculative long positions in gold have increased while short positions have decreased, indicating a bullish outlook for gold. According to the updated CFTC data from October 11th to October 17th, speculative long positions increased significantly by 41,305 to 112,738. During the same period, open interest in gold futures increased by 11,080 to 231,412 for speculative long positions, while short positions decreased by 30,225. This information suggests that short-term market investors are bullish on the future of gold.

Mitrade Analyst 

Based on the significant increase in speculative long positions and the decrease in short positions in the CFTC positioning and open interest, investors have a bullish view on the future of gold. Additionally, the market expects the Israel-Palestine conflict to continue for several months, gradually reducing its impact on gold. As a result, gold is likely to experience a slight rebound in the short term this week.

From a technical standpoint, the 60-day moving average (MA) shows a downward trend. The 14-day RSI value of 68 is above 60. On the daily MACD chart, the short-term line has crossed above the long-term line, forming a large bullish crossover with the histogram at a higher level above the zero line. DIFF and MACD are positive, while DEA is negative, indicating that gold is still in an upward trend in the short term. However, due to the RSI indicator approaching overbought territory, there may be minor fluctuations to the upside this week.

Resistance levels: $1980, $2000

Support levels: $1950, $1935

 Source: Investing.com, gold daily chart on October 23rd 

Mitrade Analyst 

Considering the analysis of various indicators, the medium to long-term downtrend in gold remains unchanged, while short-term fluctuations may lead to minor gains. Additionally, investors should pay attention to news and economic data this week that may provide guidance for the future direction of gold, such as the US Core PCE Price Index YoY for September, Q3 GDP preliminary data, and the ECB interest rate decision.