FX.co ★ XAU/USD, GOLD

During early European trade on Tuesday, gold (XAU/USD) continued its downtrend during the day, with the price falling towards $3,900. Market participants are readjusting their positions in anticipation of continued monetary policy tightening by the Federal Reserve. Economic data released Monday showed that manufacturing activity in the United States expanded for the tenth straight month in October, boosting market expectations for interest rates. Specifically, the Institute for Supply Management (ISM) Manufacturing PMI rose to 55.5 from 54.5 in September, well above consensus expectations. This strong industrial performance has reinforced “hawkish” political expectations and led to a slight rebound in US Treasury yields; This weakened the relative attractiveness of non-interest bearing assets such as gold and caused capital outflows from the gold market. While strong economic data provided fundamental support for the dollar, it failed to attract sustained buying interest as traders generally took a wait-and-see approach ahead of the US midterm elections. The outcome of these midterm elections will determine political control of Congress. The forecast markets currently tend to believe that the Democrats will control the House of Representatives and the Senate; If the Republicans achieve a comprehensive victory, it would be a huge surprise to the market and could push US Treasury yields and the dollar exchange rate higher. At the same time, the diplomatic dynamics surrounding the US-Iran conflict have also added complexities to currency markets; US President Donald Trump said that Tehran is still keen to reach a peace agreement, while Iranian Deputy Foreign Minister Abbas Araqchi confirmed that negotiations through intermediary channels were intense. However, days of negotiations between Iranian officials and Qatari mediators did not yield significant progress. Tehran had proposed a revised plan to temporarily open the strategic Strait of Hormuz for two days, but that would have been conditional on some American concessions that have not yet been fulfilled. In addition, the re-escalation of the situation between Russia and Ukraine has prevented the complete disappearance of the geopolitical risk premium. While geopolitical frictions typically provide support for safe haven assets, the broader macroeconomic environment remains unfavorable for gold. Currently, investors are paying close attention to the upcoming JOLTS US Job Openings report to get market direction guidance during the North American trading session; Meanwhile, the market is also largely focused on the official non-farm payrolls data that will be released on Friday to judge the Fed's future interest rate path.

From a technical perspective, the XAU/USD (Gold/USD) pair is showing a clear downtrend on the 4-hours chart, with prices continuing to trade below the 100-period Exponential Moving Average (EMA). This bearish bias has been further reinforced by gold's recent failure to sustain gains near the swing lows it recorded in late October. This also offset the weak upward momentum shown by the Moving Average Convergence Divergence (MACD) indicator. Additionally, the Relative Strength Index (RSI) is hovering around 40.0, indicating that gold's rebound from the recent oversold zone is only temporary and not a true reflection of momentum. Immediate support below is at Friday's low (around $3,870); If gold prices fall clearly below this demand zone, it will open the way for a continuation of the current downtrend. Conversely, on the upside, the 100-period moving average (at $4,053) forms clear overall resistance. For technical traders, a significant break above this key moving average is necessary for gold prices to ease the current selling pressure and pave the way for a broader recovery phase.