Gold prices (XAU/USD) extended their decline on Thursday, marking a fifth consecutive day of losses and falling to their lowest levels since September 19, trading in the $2,559-$2,558 range. The ongoing strength of the US Dollar (USD) continues to exert pressure on the precious metal, as the greenback remains buoyed by robust demand during the Asian trading session.
A key driver behind the USD’s strength is the market’s optimism regarding US President-elect Donald Trump’s potential policies, which are expected to stimulate economic growth and inflation. Such expectations have raised concerns that the Federal Reserve (Fed) may halt its easing cycle, even as US Treasury yields remain elevated. This backdrop of higher yields and a firmer dollar is weighing heavily on gold, which struggles as a non-yielding asset in such an environment.
The recent release of the US Consumer Price Index (CPI) for October added to the bearish sentiment surrounding gold, showing slower-than-expected progress in the fight against inflation. This could lead to fewer rate cuts from the Fed next year, further diminishing gold’s appeal as an inflation hedge. Additionally, the ongoing rally in US equities has contributed to a shift in investor preferences, as funds flow away from gold and into risk assets.
Looking ahead, traders are keeping an eye on the upcoming release of the US Producer Price Index (PPI), which may provide short-term trading opportunities. However, the main event for market participants remains the speech by Fed Chair Jerome Powell later today. Any indications of a more hawkish stance from the central bank could further pressure gold prices in the near term.
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