Gold steadies above $4,000 as investors weigh China policy and Fed signals – Comments from Vijay Valecha, CIO – Century Financial

• US Markets

The SPX posted a modest gain of 0.2% yesterday, mainly driven by the Mag 7 stocks. Amazon rose 4% after announcing a multi-year strategic partnership with OpenAI. However, the broader market ended in the red, with over 300 index members retreating. The NDX gained 0.5%.
From a fundamental standpoint, the index continues to be lifted by the strong performance of the Mag 7. Still, investors are increasingly cautious about the market’s heavy concentration in a few large stocks. On a broader level, the stocks are volatile to macroeconomic headwinds or unexpected earnings weakness. A hawkish tone from the Fed has also slowed momentum, especially amid mixed messages, with the Chicago Fed president emphasizing inflation risks over concerns about a weaker job market. All in all, the market is uncertain as December rate cuts are not guaranteed, which continues to drive volatility. Investors will be watching AMD’s earnings after market close and Shopify’s results pre-open.
From a technical perspective, a long-legged doji candlestick formed, signalling indecision in market direction. The SPX is showing short-term bearish signs as it trades below its 9-day SMA at $6,839, which could act as resistance. A breakout above this level could open the way to $6,913, while support lies near the 21-day SMA at $6,747, from which a rebound is possible.

• Gold 

During yesterday’s trading session, gold prices remained stable around $4000 as market participants evaluated the implications of China’s discontinuation of its tax rebate, which may potentially impact demand. On Saturday, Beijing announced that it would no longer permit retailers to offset a value-added tax when selling gold acquired from the Shanghai Gold and Futures Exchange. In the current session, gold is down slightly, reflecting concerns over tax policy changes in China, which are temporarily weighing on market sentiment. Nevertheless, the underlying trend remains bullish, as evidenced by a JP Morgan chart showing that institutional investors continue to hold long positions in gold despite recent market volatility. Moreover, the fundamental factors supporting the rally, including central bank and safe-haven demand, remain in place. This sentiment was exemplified by a substantial inflow on October 30th, when net inflows into gold ETFs reached 120,000 troy ounces, elevating this year’s total net purchases to 14.1 million ounces.

Technically, gold is trading at $3,992, well above the $3,970 support level observed in recent sessions. The daily RSI has recovered from oversold conditions following the formation of a bullish engulfing candlestick on October 30th. The commodity has been oscillating between $3,968 and $4,026 over the past several sessions. A breakout above the high of $4,026, as indicated by the bullish candlestick, would confirm further robust upward momentum. Conversely, a breach below $3,968, followed by a retest at $3,930, would be considered bearish and could potentially lead to a decline towards $3,890.

Meanwhile, the underlying trend in silver also remains bullish. It is presently trading at $47.69 and appears to be consolidating within a range of $47 to $49. A breach above $49 would be considered bullish for the metal, whereas a fall below $47 could potentially lead to a decline towards $46.

Gold prices in the UAE are as follows –
24 Carat – AED 480.25
22 Carat – AED 444.75
21 Carat – AED 426.50
18 Carat – AED 365.25

• US Dollar Index 

The dollar rose 0.17% on Monday, buoyed by reduced rate cut expectations in December. The dollar rose to a nine-month high against the yen and a three month high against the euro. Fed funds futures are now pricing in a 65% chance of a cut in December, down from 94% a week ago, according to the CME FedWatch Tool.

However, the greenback may face challenges due to the ongoing government shutdown as official economic data is still suspended leaving investors in the dark for clues on U.S. economic health. Further, on Monday, the ISM Manufacturing Purchasing Managers’ Index (PMI) dropped to 48.7 from 49.1 in September, showing a deeper-than-expected contraction and cooling price pressures.
EUR/USD was down 0.14% on Monday at 1.151 as the dollar strengthened but has since rebounded and is up 0.11% at the time of writing.

From a technical perspective, the dollar index is trading above the 9 and 21 SMA on the daily chart, maintaining its bullish stance. RSI on the daily chart is also near 64, indicating that buying is strong. On the 4-hour chart, immediate resistance is at the 100.2 level which also coincides with the 8th May 2025 breakout. Above this, the next resistance level is at 100.8. Immediate support is at 50 SMA level of 99.21, followed by 200 SMA level of 98.5.

• Crude Oil 

The WTI settled 0.16% higher at 61.245 in yesterday’s session as the markets digested OPEC+’s decision to pause output hikes in Q1 2026, before slipping 0.45% in the early Asian session today, trading around 60.95.

Fears of rising global supply and a relative demand slowdown still continue to weigh on sentiment. OPEC+’s decision on the pause is largely seen as an effort to find some price stability near this $60-65 range, which has been an informal equilibrium for the past couple of months. Geopolitical risks still provide a floor to the market, with drone attacks by Ukraine on Russian energy infrastructure, which briefly helped lift WTI before retreating from yesterday’s highs. However, demand concerns are evident amid a softer global growth outlook and uncertainty over U.S. monetary policy. The focus now shifts to U.S. inventory data later today for near-term direction.

On the daily chart, WTI seems cautiously bearish, with a key support level of 60, while resistance is seen at yesterday’s high of 61.245. Brent largely remains rangebound between support at the 20-day SMA of 63.45 and resistance at the 50-day SMA of 65.45.