The gold price (XAU/USD) has shown a slight recovery after hitting a one-week low earlier on Monday. The precious metal currently trades around the $2,655 level, supported by a minor dip in US Treasury bond yields and a modest decline in the US Dollar (USD). Geopolitical uncertainties and concerns about potential policy changes under US President-elect Donald Trump have also added to the safe-haven appeal of gold.
However, expectations that the Federal Reserve (Fed) may reduce the pace of its rate cuts are limiting significant gains. Signs that inflation progress has stagnated near the 2% target have dampened bullish sentiment. As traders await the Federal Open Market Committee (FOMC) monetary policy meeting, the gold price seems to have steadied after a retracement from last week’s one-month high.
Geopolitical Tensions and Softer Bond Yields Support Gold Prices
Global geopolitical developments have bolstered gold’s safe-haven demand:
- Israel’s plan to expand settlements in the Golan Heights has raised tensions in the region.
- Recent Israeli strikes in Gaza killed 53 Palestinians, with further conflicts escalating in northern and southern Syria.
- NATO Secretary General Mark Rutte warned of Russian President Vladimir Putin’s intentions to expand beyond Ukraine, increasing risks for Europe.
These events, combined with softer US bond yields, have given gold prices a modest boost.
Fed Policy and Economic Data Curb Gold Gains
The CME Group’s FedWatch Tool shows a 93% probability that the Federal Reserve will cut borrowing rates by 25 basis points this Wednesday. Recent economic data, including the Consumer Price Index (CPI) and Producer Price Index (PPI), reinforced expectations of a more cautious Fed approach to rate cuts in 2024.
However, the benchmark 10-year US Treasury yield reached a three-week high last Friday, tempering gold’s upward momentum. Monday’s release of global flash PMIs is expected to influence risk sentiment and gold’s movement. The spotlight will remain on Wednesday’s FOMC decision and Fed Chair Jerome Powell’s remarks.
Technical Analysis of Gold Price Trends
From a technical standpoint, the following levels are crucial:
- Support: The $2,644-$2,643 range aligns with a congestion zone. A decline below this could lead to $2,625, and eventually the monthly low near $2,614. A further drop to the $2,605-$2,600 zone may trigger bearish momentum.
- Resistance: Immediate resistance lies at the $2,665-$2,666 level, followed by $2,677. A sustained move above these could target the $2,700 mark, with further gains possible towards the $2,726 monthly swing high.
Conclusion
Gold’s price movement reflects the interplay between geopolitical risks and economic factors. While softer US bond yields and geopolitical tensions lend support, expectations of a cautious Fed policy and stronger Treasury yields could cap gains.
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