Thursday saw gold hit a historic high of $2,696.63 per ounce, closing at $2,691.83, fueled by Middle East tensions and US election uncertainty, as investors flocked to safe-haven assets. Meanwhile, oil prices rebounded after a four-day decline, supported by an unexpected drop in US crude inventories and escalating geopolitical tensions in the Middle East.
Gold
Gold prices surged to an all-time high of $2,696.63 per ounce on Thursday as investors sought safe-haven assets amid heightened uncertainty from the Middle East conflict and the upcoming US elections. At the close, gold rose by 0.68%, settling at $2,691.83 per ounce.
In geopolitical news, Israel announced on Thursday that it had killed Hamas leader Yahya Sinwar in Gaza. Sinwar was accused of orchestrating the “Al-Aqsa Flood Operation” on October 7, 2023, which ignited the Gaza war. Israeli Prime Minister Benjamin Netanyahu stated that Sinwar’s death offers a chance for peace in the Middle East, but he warned that the Gaza war is far from over, as efforts to release hostages continue.
“The Middle East situation is concerning, and with the US election around the corner, there’s significant uncertainty,” said Nitesh Shah, Commodity Strategist at WisdomTree. “Gold is often the go-to asset in uncertain times.”
At the same time, expectations of continued loose monetary policy are supporting gold’s upward trend. On Thursday, the European Central Bank (ECB) cut rates for the third time this year, citing better-controlled inflation and worsening economic outlooks in the eurozone, though ECB President Christine Lagarde refrained from signaling future moves.
However, stronger-than-expected US retail sales data for September and a Labor Department report showing an unexpected drop in weekly jobless claims strengthened the view that the Federal Reserve might cut interest rates by 25 basis points in November. This tempered gold’s climb from its record highs.
Looking ahead, investors will keep an eye on geopolitical developments, Fed speeches from Neel Kashkari and Christopher Waller, as well as the US September building permits data.
Gold Technical Analysis:
Gold continues its upward trend, closing with another bullish session. While Wednesday’s candle didn’t indicate overwhelming strength, prices tested the previous highs near $2,685 and showed little resistance. The 5-day and 10-day moving averages continue to support the price action. On Thursday, the market briefly dipped, but buyers pushed the price back toward the $2,700 level, indicating a strong bullish trend.
Today’s Focus:
- Strategy: Look for buying opportunities on dips, and consider shorting on rebounds.
- Resistance: $2,705-$2,710
- Support: $2,680-$2,675
Oil
Oil prices ended a four-day losing streak on Thursday, buoyed by a surprise drop in US crude inventories and intensifying tensions in the Middle East. US WTI November futures gained $0.28, or 0.40%, to settle at $70.67 per barrel, while Brent December futures rose $0.23, or 0.31%, to close at $74.45 per barrel.
Data from the US Energy Information Administration (EIA) revealed that crude oil inventories fell by 2.2 million barrels in the week ending October 11, contrary to analyst expectations of a 1.8 million barrel increase, providing support for oil’s rebound. However, the EIA also reported that US crude production hit an all-time high of 13.5 million barrels per day, stoking concerns about increased supply.
Fears of a drop in demand have led to oil being on track for its largest weekly decline in more than a month. Both OPEC and the International Energy Agency (IEA) recently revised their forecasts for 2024 and 2025 global oil demand downward. Furthermore, concerns about Israel launching a retaliatory strike on Iran—potentially disrupting Iran’s oil exports—have eased.
Citi analysts warned that although recent reports suggesting the US urged Israel not to target oil infrastructure have contributed to oil’s recent drop, geopolitical risks remain elevated due to ongoing tensions.
Investors will be closely watching the number of active US oil rigs for the week ending October 18, as well as developments in the Middle East and statements from Federal Reserve officials.
Oil Technical Analysis:
Oil prices are in a wide-ranging consolidation, with the 4-hour chart showing a triangular formation. The price is currently drifting toward the lower boundary of the range. After a low rebound, momentum seems to be fading, and choppy trading remains the dominant trend. The resistance level from the descending trendline has now shifted to the $72.0-$72.30 range.
Today’s Focus:
- Strategy: Look for selling opportunities on rallies, while considering buy trades on pullbacks.
- Resistance: $72.0-$72.5
- Support: $69.5-$69.0
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Disclaimer
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