Gold prices have been facing downward pressure as the US Dollar appreciated to a four-month high following the victory of former President Donald Trump in the US election. The precious metal is struggling as safe-haven flows decline due to market optimism and “Trump trades”. The market had been anticipating a contested outcome, but now, with more clarity surrounding the presidential victory, safe-haven assets like Gold are losing their appeal. The non-yielding XAU/USD is facing challenges as US Treasury yields trade near the highest levels since July.
Gold price has been struggling as US Treasury yields surged to their highest levels since July, with the 2-year and 10-year US Treasury bond yields rising to 4.31% and 4.47%, respectively. However, there is a possibility that Gold price may receive support in the future as Republican Donald Trump could lead to higher inflation by pledging to significantly raise trade tariffs. Investors may seek safe-haven assets like Gold as a hedge against long-term inflation risks. Trump’s economic policy, which includes imposing tariffs and reducing taxes, conflicts with the Federal Reserve’s efforts to control inflation, prompting the US central bank to potentially take a more gradual approach to easing monetary policy.
Technical analysis suggests that Gold price may see a continuation of the bearish bias, with the price currently trading around $2,650 per troy ounce. The daily chart indicates that the price is below both the nine- and 14-day Exponential Moving Averages (EMAs), with the 14-day Relative Strength Index (RSI) also below 50, supporting a bearish outlook. On the downside, the XAU/USD pair could test a three-week low of $2,603.53, and breaking below this level could pressure Gold price to navigate the region around $2,500.00. As for resistance, the psychological level of $2,700.00 and the nine-day EMA at $2,711.40 could act as barriers, with a break above potentially testing the all-time high of $2,790.11 recorded on October 31.
The US Federal Reserve’s policy decision on interest rates will be closely watched by the market, with expectations of a modest 25 basis point rate cut this week. Lower interest rates could provide support for Gold as they reduce the opportunity cost of holding non-interest-bearing assets. The Federal Reserve aims to keep inflation at 2% and maintain full employment, using interest rate decisions as its main tool. If the Fed decides to hike rates, the US Dollar tends to strengthen, while rate cuts usually weaken the USD. The tone of the Federal Open Market Committee (FOMC) statement will also be crucial, as a hawkish tone expects higher future rates, while a dovish one expects lower rates. The next release is scheduled for Thursday, November 7, 2024.
