- Gold prices dip for the second consecutive day, pressured by multiple factors.
- Ongoing Trump trade optimism supports the USD, adding downward pressure on the precious metal.
- A positive risk sentiment undermines the safe-haven appeal of XAU/USD, despite rising bets on further Fed rate cuts.
Gold (XAU/USD) remains under pressure, trading around the $2,672-$2,670 range as it continues its corrective decline from the all-time high reached on October 31. The US Dollar (USD) stays firm just below a four-month peak, driven by optimism over Donald Trump’s anticipated expansionary policies, which continues to weigh on the precious metal for the second consecutive day.
Investors are increasingly convinced that Trump's policies will stimulate economic growth and inflation, which in turn could limit the Federal Reserve's ability to ease monetary policy aggressively. This has kept US Treasury bond yields elevated, drawing investment away from non-yielding assets like gold. Despite this, a softer risk sentiment could provide some support for the safe-haven gold, especially as traders await key data releases, including the US consumer inflation figures and Fed Chair Jerome Powell's speech later this week.
Gold Vulnerable Amid USD Strength and Elevated US Bond Yields
- Gold saw its steepest weekly drop in over five months, driven by a broad-based rally in the US Dollar and rising US Treasury yields following Trump’s election win.
- The so-called "Trump trade" optimism continues to prop up the Greenback and keeps pressure on gold. Additionally, the upbeat mood in global equity markets adds to the downward momentum for the precious metal.
- The Federal Reserve recently lowered its benchmark rate by 25 basis points, signaling a potential for further easing. However, with inflation remaining a concern, the Fed may be less aggressive in future rate cuts.
- Minneapolis Fed President Neel Kashkari emphasized that the central bank needs more confidence in inflation returning to the 2% target before moving forward with additional rate cuts.
- While Trump’s policies are expected to boost inflation and potentially strain global markets, his protectionist trade agenda could support gold as a safe haven.
- However, traders may remain cautious ahead of this week's economic data, including US inflation figures on Wednesday, the Producer Price Index (PPI) on Thursday, and Retail Sales data on Friday.
- Moreover, speeches from key Fed officials, including Jerome Powell, will be closely monitored for more insights into future monetary policy.
Technical Outlook: Gold Eyes Support at $2,660; Key Levels to Watch
From a technical perspective, gold may find support around the $2,660 level, ahead of the 50-day Simple Moving Average (SMA), which currently sits near the $2,647-$2,646 region. A decisive break below last week’s swing low around $2,643 would likely trigger further downside, with the next target around the October monthly low near $2,605-$2,602.
On the upside, gold faces resistance around the $2,700 mark, with stronger resistance near $2,718 and the $2,740-$2,745 region. A sustained rally above this resistance zone could signal the end of the corrective pullback, with gold potentially aiming for a retest of its October 31 all-time high near $2,758-$2,790.
