Gold prices have been significantly impacted by various factors in recent times, particularly following former US President Donald Trump’s election victory. The rise in the US Dollar Index and increasing Treasury yields have led to a drop in Gold prices below $2,600 for the first time since mid-September. Market participants are adjusting to a less dovish Federal Reserve outlook, with rate futures indicating lower chances of a December rate cut. In addition, Gold ETFs are experiencing significant outflows, signaling a shift in investor sentiment towards riskier assets amid geopolitical tensions.
Investors have been closely monitoring Trump’s first cabinet appointments to gain insights into his policy agenda, which includes lowering taxes, imposing tariffs, and addressing illegal immigration. The appointment of Mike Waltz as National Security Advisor and Marco Rubio as Secretary of State, known for their tough stances on China, hints at potential tariff implementations. Moreover, the expectation of a less dovish Fed has led to a rise in the neutral or terminal rate to around 3.99%, according to fed funds rate futures data.
According to the World Gold Council’s November review, the non-yielding metal has suffered losses due to outflows from Gold ETFs, particularly in North America. The political risk-premium is no longer factored into Gold’s price, leaving it vulnerable to the strength of the US Dollar and rising bond yields. Fed officials have also expressed concerns about inflation risks, with Richmond Fed President Thomas Barkin stating that inflation might exceed the Fed’s 2% target. This week’s US economic schedule includes key data releases such as consumer and producer inflation, Retail Sales, and Industrial Production.
Technical analysis shows that Gold price has tumbled below key support levels, with sellers eyeing further downside towards the $2,550 level and the 100-day Simple Moving Average at $2,537. On the upside, if Gold manages to stay above $2,600, buyers will target the 50-day SMA at $2,647 and the November 7 high at $2,710. The Relative Strength Index (RSI) indicates bearish momentum, suggesting a potential extension of losses in XAU/USD.
In the broader economic context, the upcoming release of the US Consumer Price Index (CPI) on November 13 will provide further insights into inflationary trends. The MoM figure compares the prices of goods in the reference month to the previous month and is a key indicator for measuring inflation and changes in purchasing trends. A high CPI reading is generally bullish for the US Dollar, while a low reading is seen as bearish. Additionally, data from the Chicago Board of Trade indicates investor estimates for Fed easing by the end of 2024 and 2025, further impacting Gold prices in the coming months.
