Gold Price Recovers from Multi-Week Low, but Upside Potential Remains Limited Ahead of US CPI

Gold (XAU/USD) is experiencing a modest rebound on Thursday, recovering from a six-day losing streak that pushed prices to a near three-week low, around the $2,605-$2,604 range. This intraday uptick is likely due to repositioning ahead of the crucial US Consumer Price Index (CPI) report, which could shape expectations about the Federal Reserve’s (Fed) rate cut decisions and impact demand for the non-yielding metal.

At the same time, widespread market belief that the Fed will lower rates by 25 basis points in November has kept the 10-year U.S. Treasury yield above the 4% mark, boosting the U.S. Dollar (USD) to an eight-week high. This is a headwind for gold, which may limit any substantial upside. Traders are cautious, waiting for a stronger follow-through in the market before assuming that the recent corrective decline from gold’s all-time peak has concluded.

Market Factors Limiting Gold’s Upside: Strong USD and Moderate Fed Easing

The minutes from the September Federal Open Market Committee (FOMC) meeting showed a majority favored a 50 bps rate cut, confident in achieving a 2% inflation target. Some committee members, however, pushed for only a 25 bps reduction, citing still-elevated inflation and strong economic growth. There was a consensus that this large cut would not determine the pace of future reductions, which helped push the USD to a two-month high.

Additionally, key Fed officials expressed a more cautious stance on aggressive easing. Dallas Fed President Lorie Logan mentioned uncertainties in the economic outlook, while Boston Fed President Susan Collins emphasized that policy will remain data-driven. San Francisco Fed President Mary Daly hinted at more rate cuts but noted that the September decision does not indicate the size of future cuts.

Current market pricing shows a greater likelihood of a 25 bps rate cut in November and a more than 20% chance that rates will be left unchanged.

Safe-Haven Demand Supports Gold Amid Geopolitical Risks

Geopolitical tensions, particularly between Israel and Iran, are contributing to safe-haven demand for gold. Israeli Defense Minister Yoav Gallant recently warned of a potential strike against Iran, which could increase market volatility and lend further support to gold. However, traders are likely holding off on aggressive positioning until after the release of the US inflation data.

Technical Outlook: Bearish Bias with Limited Upside

From a technical perspective, the recent breakdown below the $2,630 support level signals a bearish outlook for gold. The daily chart oscillators remain in positive territory, but the metal has yet to sustain a break below the critical $2,600 level, making traders cautious about deeper losses.

If the price decisively breaks below $2,600, the next support levels to watch are $2,560, followed by the $2,535-$2,530 zone, with the $2,500 psychological level acting as a major downside target.

On the flip side, the $2,630-$2,635 range now serves as an immediate resistance level. Any upward movement is expected to face selling pressure around the $2,657-$2,658 barrier, with a sustained rally above this level possibly pushing gold toward the $2,670-$2,672 zone. A move beyond this point could challenge the all-time high near $2,685-$2,686, with a break above $2,700 setting the stage for further gains in the long-term uptrend.