XAU hits a record high as US consumer confidence declines

Amidst a decline in US consumer confidence and a falling US dollar, gold reaches a new all-time high of $2,655, with XAU/USD trading at $2,651. Fed Governor Michelle Bowman suggests reducing interest rates gradually. Middle East geopolitical unrest also increases demand for gold as a safe haven, pushing the price of the precious metal to all-time highs.

According to data given by the Conference Board, a decline in consumer confidence in the US caused gold prices to reach a new all-time high during Tuesday’s North American session. This supported a leg-up in the non-yielding metal, combined with a decline in US Treasury yields and a weakening US dollar. Having reached $2,655, the XAU/USD trades at $2,651.

According to the Conference Board, increased apprehension about the state of the labor market and the future for the economy as a whole caused consumer confidence to fall in September, reaching its lowest level since August 2021. Following the release of the data, the rate on US Treasury bonds decreased somewhat. The 10-year T-note yield decreased by two basis points to 3.73%. Simultaneously, the US Dollar Index, which gauges how well the US dollar performs against a basket of six other currencies, plummeted, falling more than 0.42% to a two-day low of 100.48.

Meanwhile, Fed Governor Michelle Bowman, a recognized hawk, indicated that risks to inflation remain important, indicating her preference for “a measured pace of cuts” to reduce the risk of reigniting inflation.

September’s CB Consumer Confidence Index dropped from 105.6 to 98.7, below the 103.8 predicted by analysts.
“The deterioration across the Index’s main components likely reflected consumers’ concerns about the labor market and reactions to fewer hours, slower payroll increases, and fewer job openings,” stated Dana Peterson, chief economist of the Conference Board.

As Hezbollah encouraged Iran to strike Israel, tensions in the Middle East grew. US data on Monday revealed a minor slowdown in business activity, although overall resilience remained high as S&P Global reported that the Services PMI above forecasts. In contrast, manufacturing activity continued to decline.

Global physically-backed Gold ETFs witnessed slight net inflows of 3 metric tons last week, according to the World Gold Council.

Market participants are certain of at least a 25 bps rate cut by the Fed at November’s meeting, while the odds for a 50 bps cut stand at 56.2%, according to the CME FedWatch Tool. The XAU/USD is upwardly biased, set to print continued record highs, even though the rally seems overextended, with traders eyeing the $2,700 figure. Momentum favors buyers even though the Relative Strength Index (RSI) has turned overbought. Hence, buyers should be wary that a pullback might be on the cards.

In the event that XAU/USD continues to rise, traders may test $2,675 and then $2,700. The $2,750 and $2,800 levels would come next. Conversely, watch for a test of the $2,600 daily high from September 18 if XAU/USD falls below $2,650. The 50-day Simple Moving Average (SMA) around $2,481 and the September 18 low of $2,546 will be the next important support levels to test.