Gold price drops to one-week low, downside seems limited amid US political uncertainty

• Gold price slides to a one-week low amid some repositioning trades ahead of the US election.

• Fed rate cut bets, falling US bond yields and subdued USD demand could lend some support.

• Middle East tensions might further contribute to limiting losses for the safe-haven XAU/USD.

Gold price (XAU/USD) attracts fresh sellers during the Asian session on Tuesday and drops to over a one-week low, around the $2,725-2,724 region, though the downside seems cushioned. The uncertainty surrounding the closely contested US presidential election, along with the risk of a further escalation of geopolitical tensions in the Middle East, might continue to offer support to the safe-haven precious metal.

Meanwhile, the unwinding of the "Trump trade" and bets the Federal Reserve (Fed) will lower interest rates further amid signs of a cooling US labor market lead to a further decline in the US Treasury bond yields. This fails to assist the US Dollar (USD) to build on the overnight bounce from a two-week low and should further contribute to limiting any meaningful depreciating move for the non-yielding Gold price. 

Daily Digest Market Movers: Gold price might continue to draw support from US political jitters, Middle East woes

The recent opinion polls indicated that Democratic candidate Kamala Harris and Republican Donald Trump are locked in a tight race to the White House, fueling political uncertainty.

The winning odds of former President Donald Trump have fallen significantly, prompting some unwinding of the "Trump Trade" and dragging the US Treasury bond yields lower.

The yield on the benchmark 10-year US government bond and the two-year Treasury note registered their biggest one-day decline in two months and nearly three weeks, respectively.

A part of the decline in the US bond yields could further be attributed to rising bets for more interest rate cuts by the Federal Reserve, bolstered by signs of a weakening US labor market. 

Iran signaled that it would deliver a harsh response to Israel's late-October strikes on its territory, while the US directly warned Iran against launching another attack against its ally Israel. 

Tuesday's US economic docket features the release of the ISM Manufacturing PMI later during the US session, although it might do little to provide any impetus ahead of the US presidential election. 

Technical Outlook: Gold price could find some support near $2,750-2,715 area ahead of the lower end of an ascending channel

From a technical perspective, last week's failure near the top boundary of an ascending channel extending from late July and the subsequent pullback from the all-time peak could be seen as a sign of bullish exhaustion. However, mixed oscillators on the daily chart warrant some caution before positioning for further losses. Hence, any further decline is more likely to find some support near the $2,720-2,715 horizontal zone, below which the Gold price could aim to challenge the trend-channel support, currently pegged near the $2,690 region. Some follow-through selling would mark a bearish breakdown and pave the way for some meaningful corrective fall in the near term.

On the flip side, the $2,748-2,750 area now seems to act as an immediate hurdle ahead of the $2,790 region, or the record high touched last Thursday. This is followed by the $2,800 round figure and the ascending channel resistance, around the $2,820 zone. A sustained strength beyond the latter will be seen as a fresh trigger for bullish traders and allow the Gold price to prolong its recent well-established uptrend.