Gold price (XAU/USD) is trading lower on Thursday after a three-day rally, despite a slight uptick. The European Central Bank (ECB) recently cut interest rates, while US Jobless Claims increased, impacting the precious metal. A rebound in US Treasury yields, with the benchmark 10-year yield surpassing last week’s lows by over 15 pips, is placing pressure on gold prices today.
Market Sentiment and ECB’s Impact
The ECB lowered its benchmark interest rate for the fourth consecutive time, moving from 3.25% to 3% as expected. This move reflects a continued effort to stabilize the Eurozone economy amidst economic uncertainty.
US Jobless Claims and Inflation Data
In the US, the number of Weekly Jobless Claims increased to 242K during the first week of December, up from a previously revised 225K in the week prior. This increase, contrary to expectations of a decline, has raised concerns over the US labor market’s strength, adding some selling pressure on the US Dollar.
On Wednesday, US consumer prices surged by 0.3% in November compared to the previous month and 2.6% year-on-year, up from 0.2% and 2.6% respectively. The core CPI remained steady at 0.3% monthly and 3.3% annually compared to November 2023.
Federal Reserve Rate Expectations and Market Dynamics
Market expectations for a 25 basis points (bps) cut in the Federal Reserve’s target rate have increased to 98%, up from 85% before the Consumer Price Index (CPI) release. This shift reflects a growing belief that inflation data may support the Fed’s potential to ease monetary policy at its upcoming meeting on December 18. This shift comes as strong macroeconomic data and expectations of heightened inflation prompt investors to scale back on future easing prospects.
Additionally, futures markets are pricing in the possibility of two rate cuts in 2025, a reduction from the previous forecast of three cuts. The increase in US yields, supported by strong inflation data, provides further strength to the US Dollar.
Technical Analysis: XAU/USD Faces Resistance and Support Levels
Gold price recent rally has slowed, with US Treasury yields rebounding and the US Dollar gaining ground due to strong inflation data.
On the higher end, resistance levels are observed at $2,720 (from November 24) and $2,750 (from November 4, 5, and 6 highs). On the downside, $2,700 serves as significant support, with further support at $2,675 and the December 9 low of $2,630.
Conclusion
Gold remains under pressure from higher US Treasury yields and a resilient US Dollar. However, a broader positive trend persists as market dynamics evolve with monetary policy adjustments.
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