Gold price (XAU/USD) remains under pressure, trading near a one-week low during Tuesday’s European session. Persistent concerns about potential Federal Reserve (Fed) policies and global economic developments weigh on the yellow metal, keeping investors cautious.
Gold Price Outlook: Impact of US Treasury Bond Yields and Federal Reserve Policies
The rise in US Treasury bond yields, driven by speculation of lower Federal Reserve rate cuts, has reduced the appeal of gold. Traders anticipate that expansionary policies by US President-elect Donald Trump may reignite inflation, limiting the Fed’s flexibility to reduce rates further. A stronger US Dollar (USD) adds to gold price challenges, as it becomes more expensive for non-dollar holders.
Gold Price Outlook: Optimism Over US Treasury Secretary Nominee and Ceasefire Hopes
Positive developments, such as Scott Bessent’s nomination as Treasury Secretary and potential Israel-Hezbollah ceasefire agreements, have redirected funds from gold to riskier assets. While geopolitical tensions, such as the Russia-Ukraine conflict and Middle East strife, support gold’s haven appeal, they haven’t been enough to counter the stronger USD.
Traders Anticipate Fed’s Next Steps Amid Inflation Concerns
Traders are keenly awaiting the FOMC minutes for insights into future rate-cut decisions. Recent statements from Federal Reserve officials suggest mixed views. Chicago Fed President Austan Goolsbee highlighted the need for more evidence before pausing rate cuts. Meanwhile, Neel Kashkari acknowledged the possibility of further reductions.
Trump’s Trade Policies and Inflation Fears Drive Market Sentiment
Trump’s tariff threats on goods from Canada, Mexico, and China are creating economic uncertainties. These measures could boost inflation, influencing bond yields and the USD, indirectly affecting gold prices. As a result, the non-yielding asset remains capped below critical resistance levels.
Resistance Levels and Potential Downside Risks
Gold faces stiff resistance near $2,650, marked by the 100-period Simple Moving Average (SMA) on the 4-hour chart. Surpassing this level might spark a surge toward the $2,700 mark. Conversely, a decisive drop below the $2,600 support level may expose the 100-day SMA at $2,565, with further declines targeting $2,536.
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