Gold Retreats After Hitting Record High; Oil Drops

2024-10-24 | Commodities , Daily Analysis , Daily Insight , Gold , Oil , Precious Metals

Gold Retreats After Hitting Record High; Oil Drops

On Wednesday, despite safe-haven demand due to the US elections and Middle East conflict, rising US Treasury yields and a stronger dollar weighed on gold prices. Gold surged to an intraday high of $2758.33 before sharply retreating, momentarily falling below the 2710 level and closing at $2715.43 per ounce. Meanwhile, oil prices dropped over 1% as US crude oil inventories grew more than expected.

Gold

Gold surged to a record high of $2758.33 per ounce on Wednesday, driven by safe-haven demand stemming from US election uncertainties and the ongoing Middle East conflict. However, it sharply retreated as the US dollar strengthened and Treasury yields climbed, ultimately closing down 1.21% at $2715.43 per ounce.

The US dollar index extended its rally, marking gains for the 16th time in the past 18 days, hitting its highest level since July 30 at 104.57 before closing up more than 0.3% at 104.42. This rise in the dollar diminished gold’s appeal to holders of other currencies, putting pressure on the yellow metal.

Meanwhile, a string of positive economic signals dampened market expectations for a significant Fed rate cut in November, pushing US Treasury yields higher. The Federal Reserve’s Beige Book, released on Wednesday, indicated little change in overall economic activity from September through early October, with businesses continuing to add jobs.

The 10-year US Treasury yield rose by 3.4 basis points, hitting a three-month high of 4.26% before closing at 4.24%. After falling for five consecutive months, the yield has surged by around 40 basis points since the start of October. Senior market strategist Bob Haberkorn from RJO Futures noted that profit-taking and rising yields are weighing on gold, adding that as long as yields remain elevated, it will be difficult for gold to rally.

Despite these pressures, analysts believe that short-term dip buyers and safe-haven demand could provide support, limiting the downside for gold amid ongoing US election and geopolitical uncertainty.

For today, investors should watch for US initial jobless claims and October PMI data from the US and Europe, along with any updates on the US elections and Middle East tensions.

Gold Technical Analysis:

Gold initially dipped below $2740 before rebounding in the European session, reaching an intraday high of $2758. The price then reversed sharply during the US session, breaking through the 2740 and 2730 levels before stabilizing around $2708. The daily candlestick closed as a bearish engulfing candle, indicating potential resistance around $2758. In the short term, traders may look to trade within the $2708–2740 range, with $2700 being a key support level.

Gold Retreats After Hitting Record High; Oil Drops
(Gold Futures, 1-day chart) 

Today’s Focus:

  • Consider selling into rallies and buying on dips.
  • Key resistance levels: $2730–2740
  • Key support levels: $2700–2692

Oil

Oil prices fell over 1% on Wednesday, ending a two-day rally after US crude oil inventories grew much more than expected. By the close, WTI crude for December delivery was down 1.35% at $70.77 per barrel, while Brent crude fell 1.42% to $74.96 per barrel.

The US Energy Information Administration (EIA) reported an increase of 5.47 million barrels in crude oil inventories for the week ending October 18, far surpassing market expectations of a 270,000-barrel rise. The larger-than-expected inventory build weighed on oil prices.

Meanwhile, the geopolitical situation in the Middle East remains uncertain. According to NBC, Israeli officials are considering a small-scale ceasefire proposal from Egypt to pave the way for a larger agreement with Hamas. This comes as US Secretary of State Antony Blinken arrived in Israel to restart diplomatic efforts.

Data also revealed that oil traders are holding a record number of options contracts to hedge against potential supply disruptions in the Middle East. Brent crude options open interest recently exceeded 4 million contracts, representing 4 billion barrels of oil, with positions increasing by more than 25% this month.

Today’s Focus: Investors should continue to monitor developments in the Middle East and watch for US initial jobless claims and EIA crude oil inventory data.

Oil Technical Analysis:

Oil prices experienced a volatile session, initially dipping to $70.1 before rebounding in the US session. Prices briefly broke through $71.4 before retreating again to close just above $70. The daily candlestick formed a small bullish pattern, suggesting support at the $70 level.

Gold Retreats After Hitting Record High; Oil Drops
(Light Crude Oil Futures, 1-day chart) 

Today’s Focus:

  • Consider buying on pullbacks and selling into rallies.
  • Key resistance levels: $73.0–74.3
  • Key support levels: $70.9–70.0

Risk Disclosure
Securities, Futures, CFDs and other financial products involve high risks due to the fluctuation in the value and prices of the underlying financial instruments. Due to the adverse and unpredictable market movements, large losses exceeding your initial investment could incur within a short period of time.  
Please make sure you fully understand the risks of trading with the respective financial instrument before engaging in any transactions with us. You should seek independent professional advice if you do not understand the risks explained herein. 

Disclaimer
This information contained in this blog is for general reference only and is not intended as investment advice, a recommendation, an offer, or an invitation to buy or sell any financial instruments. It does not consider any specific recipient’s investment objectives or financial situation. Past performance references are not reliable indicators of future performance. Doo Prime and its affiliates make no representations or warranties about the accuracy or completeness of this information and accept no liability for any losses or damages resulting from its use or from any investments made based on it. 
The above strategies reflect only the analysts’ opinions and are for reference only. They should not be used or considered as the basis for any trading decisions or as an invitation to engage in any transaction. Doo Prime does not guarantee the accuracy or completeness of this report and assumes no responsibility for any losses resulting from the use of this report. Do not rely on this report to replace your independent judgment. The market is risky, and investments should be made with caution. 

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