Gold price rebounds as US yields decline amid persistent tensions in Middle East

• Gold price holds onto recovery propelled by a fall in long-term US Treasury yields.
• The US Dollar strengthened after S&P Global PMIs signaled an uptick in US business activity.
• Investors await the Q3 GDP and the Fed’s preferred inflation gauge, which could influence the Fed’s November policy decision.

Gold price (XAU/USD) clings to gains around $1,970 on Wednesday, prompted by a decline in long-term US bond yields. The precious metal managed to recover swiftly as the near-term trend remains firmer amid the Israel-Palestine conflict. The risks of widening tensions in the region persist as the Israeli troops are preparing to enter Gaza. A ground assault by the Israeli army in Gaza could escalate the chances of Iran’s intervention in the ongoing conflict.

The appeal for the US Dollar improved significantly as S&P Global reported an uptick in US business activity in October despite higher interest rates and multi-year high US bond yields. Unlike Asian and European economies, the US economy seems to be handling higher borrowing costs effectively due to robust consumer spending, easing price pressures, and strong labor demand.

Daily Digest Market Movers: Gold price awaits US Q3 GDP data

• Gold price trades inside Tuesday’s range but holds onto recovery to near $1,970.00 prompted by a decline in long-term US bond yields.
• The near-term demand for Gold remains upbeat as the Israeli army could enter Gaza for a ground assault anytime.
• The ground attack by the Israeli troops was delayed as various nations urged for the safe dispatch of humanitarian aid for Gaza civilians.
• Meanwhile, 10-year US Treasury yields fell back to 4.83% as investors shifted their focus to the US Q3 GDP and core Personal Consumption Expenditure (PCE) price index data for September. Both indicators have the potential to affect the Federal Reserve’s (Fed) interest rate decision to be announced on November 1.
• Economists forecast that the US economy will grow by 4.2% on an annualized basis in the third quarter, against the 2.1% growth rate recorded in the second quarter. 
• As per the estimates, the monthly core PCE price index expanded at a higher pace of 0.3% in September against a growth of 0.1% in August. The annual core PCE inflation is expected to grow at a slower pace of 3.7% against a 3.9% reading from August.
• An upbeat Q3 GDP report and steady core PCE inflation could propel expectations of further policy-tightening by the Fed.
• As per the CME Group Fedwatch tool, traders see the Fed keeping interest rates unchanged at 5.25%-5.50% as an almost certain outcome. The odds of one more interest rate increase in any of the two remaining monetary policy meetings in 2023 have increased to 27%.
• Fed policymakers have signaled they are willing to keep interest rates unchanged in the range of 5.25%-5.50% on November 1 as higher bond yields are sufficient to reduce overall spending and investment. 
• The appeal for Golde diminished on Tuesday after S&P Global reported an uptick in the US business activity in October.
• The Manufacturing PMI reached the 50.0 threshold for the first time since November 2022. The data outperformed expectations of 49.5 and September's reading of 49.8. The Services PMI landed at 50.9 against expectations of 49.9 and the prior release of 50.1.
• S&P Global reported that strong demand conditions drove the expansion amid a renewed increase in new orders. The agency also reported that market sentiment has improved in part due to hopes of interest rates having peaked.
• The US Dollar, tracked by the US Dollar index, recovered sharply from 105.40 as the US economy appears to be performing better while the European economy reported a downtick in business activity due to higher borrowing costs.

Technical Analysis: Gold price consolidates near $1,970

Gold price trades directionless around $1,970.00 after a sharp recovery as investors await key US economic data to be released later this week. The precious metal remains firmer, on a broader note, as it is trading near a five-month high. Short-term Exponential Moving Averages (EMAs) are upward-sloping, which indicates that the overall trend is bullish. Momentum oscillators also indicate that the bullish impulse is active.