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Gold price remains depressed around $2,675-$2,670 area on stronger USD.

November 11, 2024

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Gold price drifts lower for the second straight day and is pressured by a combination of factors.
The Trump trade optimism continues to underpin the USD and weighs on the precious metal.
A positive risk tone also undermines the safe-haven XAU/USD despite more Fed rate cut bets.

Gold price (XAU/USD) maintains its offered tone around the $2,672-2,670 region heading into the European session on Monday and seems vulnerable to prolonging its recent corrective decline from the all-time peak touched on October 31. The US Dollar (USD) stands firm just below a four-month peak set last Thursday amid the optimism over Donald Trump’s anticipated expansionary policies and turns out to be a key factor exerting pressure on the commodity for the second straight day.

Meanwhile, investors seem convinced that Trump’s policies could spur economic growth and boost inflation, and restrict the Federal Reserve’s (Fed) ability to ease aggressively. This keeps the US Treasury bond yields elevated and contributes to driving flows away from the non-yielding Gold price. That said, a softer risk tone could limit losses for the safe-haven XAU/USD as traders await the US consumer inflation figures and Fed Chair Jerome Powell’s speech later this week.

Gold price seems vulnerable amid Trump trade-inspired bulls USD, elevated US bond yields

Gold price registered its steepest weekly decline in over five months in the wake of a broad-based US Dollar rally and a sharp rise in the US Treasury bond yields following Donald Trump’s victory in the US presidential election.
The so-called Trump trade euphoria continues to act as a tailwind for the Greenback and exerts some downward pressure on the Gold price for the second successive day on Monday amid the upbeat mood around the equity markets.
The Federal Reserve last week lowered its benchmark overnight borrowing rate by 25 basis points and signaled plans to ease monetary policy further, with traders still pricing in a 65% chance of another interest rate cut in December.
Minneapolis Fed President Neel Kashkari said that the central bank wants to have confidence and needs to see more evidence that inflation will go all the way back to the 2% target before deciding on further interest rate cuts.
President-elect Trump’s protectionist push is expected to exacerbate global trade tensions and trigger a worldwide trend of restrictive trade practices, which could strain global markets and offer support to the safe-haven XAU/USD.
Investors might also refrain from placing aggressive directional bets ahead of this week’s release of the US consumer inflation figures on Wednesday, the US Producer Price Index on Thursday and US Retail Sales figures on Friday.
Apart from this, investors will closely scrutinize comments from a slew of Fed officials, including Fed Chair Jerome Powell, for more signals about the rate-cut path, which will drive the USD and provide a fresh impetus to the commodity.

Technical Outlook: Gold price nees to break below 50-day SMA for bears to seize control

From a technical perspective, any further decline is likely to find some support near the $2,660 zone ahead of the 50-day Simple Moving Average (SMA), currently pegged near the $2,647-2,746 region. Some follow-through selling below last week’s swing low, around the $2,643 area, will be seen as a fresh trigger for bearish traders. Given that oscillators on the daily chart have been losing positive traction, the Gold price might then accelerate the fall toward the October monthly swing low, around the $2,605-2,602 region.

On the flip side, momentum back above the $2,700 mark now seems to confront stiff resistance near the $2,718 region ahead of the $2,740-2,745 supply zone. A sustained strength beyond the latter will suggest that the corrective pullback has run its course and lift the Gold price beyond the $2,750 static resistance, towards the $2,758-2,790 zone, or the record high touched on October 31.