Gold prices have extended their losses, driven by the ascent of US Treasury yields and a robust US dollar. The precious metal failed to hold at the $2,665 mark and has reverted to its near-term downward trajectory.
Investors’ attention has been fixated on the Federal Reserve’s impending decision. Anticipation of a so-called “hawkish cut” by the Fed on Wednesday has led to an upswing in US Treasury yields. This, in turn, has exerted downward pressure on gold.
XAU/USD remains under duress, inching closer to the $2,630 support level. The metal’s attempts to rally have been brief and unsuccessful. In the European session on Tuesday, it retreated further, burdened by the strengthening dollar and rising yields.
The stronger-than-anticipated US preliminary S&P Global Purchasing Managers Index figures from Monday have bolstered the perception of steady US growth in the fourth quarter. This has also led to expectations of a gradual easing by the Fed in 2025.
Today, US Retail Sales data is awaited, with forecasts suggesting continued buoyancy in consumption during November. In this climate, investors are confident of a rate cut by the Fed on Wednesday but are bracing for hawkish forward guidance, which is further weighing on gold.
Daily Digest of Market Movers
Gold has been losing ground as the focus has shifted away from the Middle East conflict, at least for now. The spotlight is now on the Federal Reserve, which has commenced its two-day monetary policy meeting.
Futures markets are nearly certain of a 25 basis points interest rate cut on Wednesday, as per the CME Group’s FedWatch Tool. However, the likelihood of more than two quarter-percentage cuts in 2025 is less than 30%.
Monday’s US data indicated that the services sector’s business activity expanded more rapidly than expected in December, affirming the economy’s healthy growth rate in the fourth quarter.
Later in the day, US Retail Sales are projected to show a 0.5% growth in November, up from 0.4% in the previous month. This implies a positive contribution from consumption, which constitutes 65% of the GDP, in the fourth quarter.
Technical Analysis
Gold has been on a downward path since being rejected at the $2,720 resistance area last week. A potential double top at that level and the bearish engulfing candle on Thursday have given sellers optimism.
The negative candle on the 4-hour chart signals growing bearish momentum. The XAU/USD pair may find some respite around the $2,630 area, which was the December 9 low. However, the key downside target remains the lows of November 25, 26, and December 6, near $2,610.
On the upside, resistances are pegged at Monday’s high of $2,665 and Friday’s intraday level of $2,690.
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