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Gold Price Faces Pressure Amid US Dollar Rally and Rising Bond Yields, but Safe-Haven Demand Caps Losses
Commodity
Summary:
Gold prices face significant downside pressure as rising US bond yields and a stronger US Dollar weigh on the metal.
Sell
TradingXAUUSD
EXP
2635.00
Entry Price
2535.00
TP
2700.00
SL
2638.82 -4.76 -0.18%
0
Point
Flat
2535.00
TP
CLOSING
2635.00
Entry Price
2700.00
SL
Gold prices (XAU/USD) were under heavy pressure on Monday, snapping a four-day winning streak as a combination of rising US bond yields and a stronger US Dollar (USD) weighed on the precious metal. Despite this, concerns over global trade tensions and ongoing geopolitical risks continued to provide some support to the yellow metal, keeping losses in check. As of the morning session in Europe, gold traded around $2,630, near the lower end of its daily range, as market participants reacted to a volatile mix of US macroeconomic factors and global uncertainties.
The primary factor driving gold’s bearish sentiment was a robust rebound in US bond yields, which helped the US Dollar recover from its recent pullback to a nearly three-week low. Following a period of softer US Treasury yields, which had previously prompted some weakness in the greenback, a sharp rise in yields has reignited demand for the dollar. The resultant strength in the USD exerted downward pressure on gold, a non-yielding asset, making it less attractive relative to higher-yielding assets.
In addition to the US bond market dynamics, expectations surrounding US President-elect Donald Trump’s economic agenda have contributed to the pressure on gold. Trump's tariff policies, particularly his threat of imposing a 100% tariff on nations in the BRICS bloc – Brazil, Russia, India, China, and South Africa – if they move away from the US Dollar in international transactions, have sparked fresh concerns over trade wars and inflationary pressures. Many investors are now bracing for a second wave of trade tensions, which could potentially push consumer prices higher and prompt the Federal Reserve to reconsider its recent stance on interest rates. As the risk of inflation rises, the market anticipates that the Fed may halt its rate cuts, further diminishing the appeal of gold.
Despite these headwinds, the safe-haven status of gold remains intact, supported by persistent geopolitical risks and a softer risk appetite. Gold has long been considered a safe-haven asset, particularly in times of uncertainty. The ongoing military escalation in Ukraine, with Russian and Syrian jets launching airstrikes against rebels in Aleppo and Hama, has intensified concerns about broader regional instability. Furthermore, Ukrainian President Volodymyr Zelenskyy’s comments about potentially ceding occupied territory to Russia in exchange for a ceasefire have raised questions about the future geopolitical landscape in Eastern Europe.
The ongoing trade tensions, including the simmering conflict between the US and China, continue to stoke fears of an economic slowdown. The Chinese economy’s fragility was underscored by recent PMI data, which showed only modest improvements in manufacturing activity, with China’s official Manufacturing PMI edging up to 50.3 in November, while the Non-Manufacturing PMI softened to 50.0. On the other hand, the Caixin Manufacturing PMI, a key private sector gauge, jumped to 51.5 in November, reflecting hopes that the Chinese government will introduce more stimulus measures to support domestic demand. These mixed economic signals from China suggest that growth concerns will persist, which could continue to bolster gold as a hedge against economic uncertainty.
Looking ahead, gold’s performance will largely depend on upcoming US economic data, particularly this week’s macro releases, starting with the ISM Manufacturing PMI later on Monday. Investors will be closely monitoring these figures for clues about future Federal Reserve policy moves. A better-than-expected reading could fuel further USD strength, which may further weigh on gold prices. Conversely, weaker data might revive interest in the yellow metal as a safe-haven asset, keeping a floor under prices amid global uncertainties.
Technical Analysis
From a technical perspective, gold prices are poised for further downside, with the metal maintaining its bearish tone. Gold has settled around the $2,630 level since the morning session, with the primary focus on a potential continuation of the downward trend. The price remains under the influence of the 50-period Exponential Moving Average (EMA50), which is exerting negative pressure on the metal and supporting expectations for a decline. If the bearish trend continues, the next key support level is at $2,600, where traders will be looking for signs of a reversal or consolidation.
The bearish outlook remains intact as long as gold prices stay below the $2,658 resistance level. A break above this resistance could signal a shift in momentum, but for now, the downward pressure is likely to persist, especially with rising US bond yields and a strengthening dollar.
In terms of immediate price action, the expected trading range for today is between $2,605 (support) and $2,640 (resistance). If gold fails to hold above the support level, it could see further downside, with the $2,600 level as the next target for bears.
TRADE RECOMMENDATION
SELL GOLD
ENTRY PRICE: 2635
STOP LOSS: 2700
TAKE PROFIT: 2535
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