Gold has shown a slight upward tick as the US Dollar and Treasury yields ease. The reversal from last week’s highs is finding some footing with the retreat of the US Dollar.
The combination of lower US yields and a softer Dollar could offer support to Gold as the market braces for the Federal Reserve’s interest-rate decision. However, XAU/USD remains under pressure and is dangerously near the $2,635 support zone.
At the start of the week, Gold (XAU/USD) has opened with a moderately positive sentiment, thanks to a mild reversal in the US Dollar amid falling US Treasury yields. Nevertheless, the precious metal is still close to its recent lows following a 2.5% sell-off late last week.
On Monday, US Treasury yields pulled back after a sharp rally last week, reducing some of the recent bullish pressure on the US Dollar. Investors are being cautious about making directional bets on the US Dollar as they await the crucial Federal Reserve monetary policy decision on Wednesday.
The market is nearly fully anticipating an interest rate cut, but only a gradual easing next year. Additionally, expectations that Donald Trump’s policies will stoke inflationary pressures are acting as a tailwind for the US Dollar.
Daily Digest of Market Movers
Gold is facing challenges due to expectations of a shallow Fed easing cycle but is still drawing support from the highly volatile situation in the Middle East. Israel’s continued attacks on military targets in Syria and considerations of expanding Golan Heights settlements, which have been opposed by Saudi Arabia, Qatar, and the United Arab Emirates, are contributing to the geopolitical tensions.
In Monday’s economic calendar, the US S&P Preliminary PMIs are projected to show a moderate contraction in manufacturing activity and slower growth in the services sector. The NY Empire State Manufacturing Index is also expected to have worsened to a reading of 12 in December from 31.2 in the previous month. However, the impact of these figures on the Dollar is likely to be limited ahead of the Fed decision.
The CME Group’s Fed Watch Tool indicates a 97% probability that the US central bank will cut interest rates by 25 basis points on Wednesday. Still, for 2025, markets are now pricing in just two more cuts, fewer than the three expected earlier this month.
Technical Analysis
Gold’s rally was halted again at the $2,720 resistance level last week before prices declined. A potential double top at that level and Thursday’s bearish engulfing candle are giving bears some optimism.
The $2,635 support area is holding off downward attempts, but the commodity lacks upward momentum. Previous support levels at $2,675 could act as resistance before the $2,692 (December 12 high) level.
On the downside, if the price falls below the December 9 low of around $2,630, the next bearish target would be the November 25, 26, and December 6 low of approximately $2,610.
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