Gold price saw a notable recovery after hitting a two-month low as traders await crucial US consumer inflation figures for further direction. The uncertainty over US President-elect Donald Trump’s trade tariffs and their impact on the global economy has driven investors towards safe-haven assets like gold. However, elevated US bond yields and a bullish USD may cap gains for the non-yielding XAU/USD.
The US Dollar remains near its highest level since early May on hopes that Trump’s expansionary policies will boost inflation and limit interest rate cuts by the Federal Reserve. This outlook supports elevated US Treasury bond yields and restrains any significant appreciation for gold. Despite this, gold has managed to hold above the $2,600 mark and end a three-day losing streak to its lowest level since September. The Gold price seems to be supported by repositioning trades ahead of the US consumer inflation data.
The technical setup for gold price supports prospects for further losses, with a break below the $2,600 mark awaited. The overnight resilience below the 38.2% Fibonacci retracement level of the June-October rally indicates a bearish trend. While oscillators on the daily chart suggest a downside bias, some follow-through buying could lift the price to resistance levels near $2,630-2,632 and $2,650-2,655. However, bearish traders are advised to wait for acceptance below $2,600 before placing fresh bets, with potential support at the $2,540 confluence.
The US Dollar’s climb to a multi-month high on optimism over Trump’s policies has driven gold price below $2,600, marking its lowest level since September. Trump’s protectionist tariffs could pressure inflation and limit interest rate cuts by the Federal Reserve, supporting elevated US bond yields. Comments from Federal Reserve officials suggest that inflation may be coming under control, with the release of US consumer inflation figures expected to influence future rate-cut expectations.
Bulls in the USD may pause as traders await the latest US consumer inflation figures, which are crucial in shaping market expectations about the Fed’s rate-cut path. The yield on the benchmark 10-year US government bond remains high, reflecting reduced bets for aggressive interest rate cuts by the Federal Reserve. The release of the headline Consumer Price Index (CPI) is anticipated to show a rise in inflation, raising doubts about the Fed’s flexibility in cutting rates.
