The gold price (XAU/USD) has been under pressure during the first half of Monday’s European session, hovering near $2,630. A resurgent US Dollar (USD) and climbing US Treasury bond yields have contributed to this downward momentum. Let’s examine the forces shaping the market and what lies ahead.
Impact of Rising Bond Yields on Gold Price
Gold often struggles in the face of rising US Treasury bond yields. This is because higher yields increase the opportunity cost of holding non-yielding assets like gold. On Monday, the USD rebounded strongly, recovering from a recent dip to a three-week low. This development placed additional pressure on the precious metal, sustaining its bearish tone.
Gold Price Affected by US Economic Policies and Stronger USD
Investors believe that US President-elect Donald Trump’s proposed tariff measures and expansionary policies could fuel inflation. This outlook, paired with a potential halt to Federal Reserve interest rate cuts, has kept the USD firm. A stronger USD further diminishes the appeal of gold for international investors.
Additionally, Trump’s recent threat to impose 100% tariffs on BRICS nations has amplified concerns of escalating trade wars. These tensions typically support safe-haven assets like gold. However, this time, rising bond yields have outweighed their impact.
Geopolitical Developments Affecting Gold
Global events continue to influence gold prices. Ukrainian President Volodymyr Zelenskyy’s conditional offer for peace negotiations with Russia and renewed airstrikes in Syria have heightened geopolitical uncertainties. Such developments often create mixed signals for gold traders.
Meanwhile, China’s economic indicators, including its PMI reports, hint at slow but steady improvement. Investors are watching whether the Chinese government will introduce stimulus measures, which could have indirect implications for global gold demand.
Upcoming US Data to Drive Market Sentiment
Traders are eyeing this week’s key US economic data, including the ISM Manufacturing PMI. These releases could influence the Federal Reserve’s future policy decisions. Any hints of potential rate hikes may further bolster the USD and pressure gold prices.
Technical Analysis: Key Levels to Watch
From a technical standpoint, the gold price risks retesting last week’s low near $2,605. A break below $2,600 could expose the 100-day Simple Moving Average (SMA) around $2,575.
Conversely, a recovery above $2,642 could signal renewed bullish momentum. The next resistance levels are $2,652 and $2,665, with potential to reclaim $2,700 if buying interest persists.
Conclusion
Gold prices are facing significant headwinds due to rising US bond yields and a stronger USD. However, ongoing geopolitical tensions and key macroeconomic data releases could offer mixed influences. Traders must closely monitor these developments to navigate the current market environment.
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