Gold price continues to drift lower for the second consecutive day as a combination of factors puts pressure on the precious metal. The ongoing optimism surrounding the US Dollar, fueled by expectations of Donald Trump’s expansionary policies, is weighing on the XAU/USD pair. Elevated US bond yields and bets for less aggressive Fed rate cuts are further undermining gold prices.
The recent heavy losses in gold prices can be attributed to the strong rally of the US Dollar and the surge in US Treasury bond yields following Trump’s victory in the presidential election. The market mood remains cautious as investors await the release of the latest US consumer inflation figures and speeches by influential FOMC members later in the week. However, the Trump trade euphoria continues to support the Greenback and suppress gold prices. Neel Kashkari of the Minneapolis Fed stated that more evidence of inflation reaching the 2% target is necessary before deciding on further rate cuts.
From a technical perspective, gold prices are close to a multi-week low and the pivotal support of the 50-day SMA. Any further decline may find support near the $2,660 zone, with the possibility of a drop towards the October monthly swing low. On the other hand, a move above the $2,700 mark could face resistance near the $2,718 region before potentially reaching the $2,750 static resistance. The upcoming economic indicators such as the Consumer Price Index (YoY) will play a crucial role in determining the market direction for gold prices.
In the midst of President-elect Trump’s protectionist push and the potential exacerbation of global trade tensions, investors are refraining from placing aggressive bets. The Federal Reserve’s recent interest rate cut and plans for further easing continue to influence market sentiment, with uncertainties surrounding the rate-cut path. Traders are closely monitoring comments from Fed officials, including Chair Jerome Powell, to gauge the future direction of interest rates and its impact on the US Dollar and gold prices.
Overall, the outlook for gold prices remains uncertain amid a combination of factors including the strength of the US Dollar, US bond yields, and market sentiment surrounding Trump’s policies. The upcoming economic indicators and speeches by Fed officials will provide further clarity on the direction of gold prices in the near term. Traders and investors are advised to exercise caution and closely monitor developments in the market to make informed decisions regarding gold trading.
