• Gold up roughly 8% since Hamas attack on Israel
• Precious metal influenced by geopolitical risk and Fed hike bets
• Watch out for key US data, including September PCE report
• Gold heavily bullish but RSI overbought on daily charts
• Key level of interest found at $2000

Gold has been an unstoppable force this month as mounting geopolitical tensions rocked global markets.

The precious metal is up roughly 8% since the Hamas attacks on Israel (October 7th) with prices approaching the key psychological $2000 level – a level not seen since mid-May.

Despite prices retreating last Friday, bulls have entered the new week with renewed vigor as investors closely monitor the developments in the Middle East. It is worth noting that gold has gained 7% month-to-date, its best month since March 2023 thus far. More volatility could be on the horizon for gold thanks to not only geopolitical tensions but Fed hike expectations.

Given the key technical and fundamental forces at play, it will be wise to keep a close eye on gold.

Here are 3 key factors to watch out for:

1. Heightened geopolitical risks

It is worth noting that gold is a safe-haven asset that investors sprint towards in times of uncertainty.

Mounting tensions in the Middle East represent a major element of uncertainty. This has rattled financial markets, clouded sentiment, and left investors on edge. Concerns remain elevated over the spectre of a wider conflict in the region, especially after the U.S. announced it was sending more military resources. With this development representing a threat to the global economy, markets remain uneasy and gloomy.

• Should rising tensions between Israel and Hamas spill over into other regions, this could keep gold prices buoyed – pushing the precious metal beyond $2000.
• Any fresh signs of easing geopolitical tensions may dampen appetite for the precious metal, pulling prices away from the psychological $2000 point.

2. Fed hike expectations

This will be a week packed with key US economic reports that have the potential to shape Fed rate expectations. Gold remains highly sensitive to monetary policy speculation due to its zero-yielding nature.

It would be wise to keep an eye on the latest US GDP and September PCE report. Real GDP in the third quarter of 2023 is expected to jump to 4.3% up from the 2.1% in the previous quarter. The real mover for gold may be the Fed’s preferred inflation gauge, the Core Personal Consumption which could offer key clues on the Fed’s next move. Fed Chair Jerome Powell is also due to give remarks mid-week which has the potential to move gold, especially if any fresh clues are offered on interest rates.

As of writing, traders are currently pricing in a 1 in 4 chance of a 25 basis point Fed hike by the end of 2023.

• Gold could push higher if US economic data disappoints and there are signs of cooling inflationary pressures.
• Should overall US data print and inflation print above market expectations, gold could fall as rate hike expectations jump.

3. Technical forces

Gold is heavily bullish on the daily charts as there have been consistently higher highs and higher lows. Prices are trading above the 50, 100, and 200-day SMA while the MACD trades to the upside. However, the Relative Strength Index (RSI) signals that prices are heavily overbought – suggesting a potential technical throwback down the road.

A technical throwback is when prices break above a resistance level, but re-tests the resistance before resuming its uptrend.

• Should the upside momentum hold, bulls could target the psychological $2000 with $2018 acting as the next key point of interest.
• Sustained weakness below $2000 may encourage a decline back towards $1945 and potentially $1930 – where the 200-day SMA resides.

Currently, Bloomberg’s FX model points to a 75% chance that Gold will trade within the $1931.97 –  $2025.82 range this week.