28 Oct 2024

CURRENT;-2733

TARGET2800

SL;-2720

• Gold experiences a decline following the China Gold Association's report indicating a decrease in jewelry consumption.
• The primary factor attributed to this drop in demand is the increasing price of Gold.
• Meanwhile, XAU/USD continues to trade within a narrow range, maintaining its position within a broader bullish trend.

OVERVIEW

XAU/USD experienced a decline of more than half a percent, trading in the $2,730 range on Monday, yet it continues to operate within the limits established by the previous week's narrow range. The decrease in the precious metal's value is attributed to reports indicating a weakening demand from China, its largest market.

Nevertheless, the metal is still supported by safe-haven investments, driven by the ongoing conflict in the Middle East, which escalated over the weekend following Israel's airstrikes on Iran. However, the impact of these developments was mitigated by the decision to focus solely on military targets, avoiding oil and nuclear facilities.

Gold receives an additional advantage due to the rising uncertainty surrounding the results of the US presidential election, coupled with the general decline in global interest rates. This situation, considering that gold does not yield interest, increases its appeal to investors in comparison to other asset classes.

• Gold drops after report shows softening Chinese demand 
• Gold prices experienced a decline on Monday following the release of data from the China Gold Association (CGA), which indicated a decrease in demand from the world's largest gold consumer during the first three quarters of 2024 compared to the same timeframe in the previous year.
• Total gold consumption amounted to 742 tons from January to September, reflecting an 11.18% decrease relative to the same period last year.
• The consumption of gold jewelry in China saw a significant drop of 27.53%, totaling 400 tons when juxtaposed with the figures from 2023, as reported by the CGA.
• Conversely, demand for gold bars and coins rose by 27.14%, reaching 283 tons compared to the previous year. Gold utilized in industrial applications also saw a decline, totaling 59 tons, which represents a decrease of 2.78%.
• The report attributed the decline in demand primarily to the elevated gold prices, stating, "In the first three quarters, the price of gold continued to rise, and the consumption of gold jewelry was significantly affected."
• Despite this, trading activity on the Shanghai Gold Exchange surged by 47.49%, amounting to 46,500 tons (23,200 tons on one side), as traders engaged in the market rally. Additionally, interest in exchange-traded funds (ETFs) also saw an uptick.
• The report further noted, "Domestic gold ETF holdings increased to 91.39 tons, marking a rise of 29.93 tons since the end of 2023, which is an increase of 48.69%."

Technical Analysis: Gold continues in a sideways band

Gold trades in a mini range between $2,708 and $2,758 after peaking at the latter level and rolling over.

That said, the yellow metal is in a steady uptrend on all time frames (short, medium and long), which, given the technical principle that “the trend is your friend,” the odds favor more upside.