Gold price consolidates heavy intraday losses; defends 100-period SMA on H4.

Gold price falls sharply from a three-week high in the wake of the risk-on environment.
Bets for slower Fed rate cuts also drive flows away from the non-yielding yellow metal.
Retreating US bond yields could support the XAU/USD and warrants caution for bears.

Gold price (XAU/USD) maintains its heavily offered tone through the first half of the European session on Monday, albeit manages to hold above the $2,650 level and defend the 100-period Simple Moving Average (SMA) on the 4-hour chart. Scott Bessent’s nomination as US Treasury Secretary clears a major point of uncertainty for markets. This, along with reports that Israel was close to reaching a ceasefire with the military group Hezbollah in Lebanon, boosts investors’ confidence and turns out to be a key factor undermining demand for the safe-haven precious metal.

Moreover, expectations that US President-elect Donald Trump’s proposed policies could reignite inflation and limit the scope for the Federal Reserve (Fed) to cut interest rates act as a tailwind for the US Dollar (USD). This exerts additional pressure on the non-yielding Gold price. Meanwhile, Bessent is expected to take a more phased approach to tariffs in an attempt to rein in the budget deficit. This, in turn, offers some respite to bond investors and triggers a sharp decline in the US Treasury bond yields, which offers some support and helps limit the downside for the XAU/USD.

Gold price remains depressed amid upbeat market mood and reviving USD demand

The risk-on mood fails to assist the Gold price to capitalize on last week’s strong gains and leads to an intraday turnaround from a three-week high on Monday.
Scott Bessent’s nomination as US Treasury Secretary and de-escalation in the long-running Middle East conflict boosts investors’ confidence at the start of a new week.
Media reports suggest that Israel and the Lebanon-based Hezbollah militant group are on the cusp of a ceasefire deal, though an agreement is not fully formed yet.
Furthermore, the optimism over more business-friendly policies from the new Trump administration remains supportive of a positive tone around the equity markets.
S&P Global’s Composite US PMI rose to 55.3 in November – the highest level since April 2022 – and suggested that growth probably accelerated in the fourth quarter.
The recent hawkish remarks from several Federal Reserve policymakers and potential inflation surprises could support an on-hold interest rate decision in December.
The CME Group’s FedWatch Tool indicates that traders are currently pricing in just over a 55% probability that the Fed will cut interest rates by 25 basis points next month.
Investors this week will closely scrutinize the minutes from the November FOMC meeting, and the US Personal Consumption and Expenditure (PCE) Price Index data.
Bessent’s conservative views on fiscal policy trigger a corrective decline in the US Treasury bond yields and prompt some US Dollar profit-taking from a two-year top.

Gold price could weaken further once a pivotal support near 100-period SMA on H4 is broken

From a technical perspective, the sharp intraday downfall drags the Gold price below the 23.6% Fibonacci retracement level of the recent strong recovery from a two-month low touched on November 14. The subsequent decline, however, stalls near the 100-period Simple Moving Average (SMA), around the $2,660-2,658 region. Meanwhile, oscillators on the daily chart have recovered from the negative zone and are holding in positive territory on the 4-hour chart. This makes it prudent for bearish traders to wait for some follow-through selling below the 100-period SMA and the 38.2% Fibo. level, around the $2,650 area, before placing fresh bets. The XAU/USD might then accelerate the fall towards the $2,630-2,629 region, or the 50% retracement level, en route to the $2,610-2,608 zone, or the 61.8% Fibo. level.

On the flip side, the $2,677-2,678 region (23.6% Fibo. level) now seems to act as an immediate hurdle ahead of the $2,700 mark. This is followed by the Asian session high, around the $2,721-2,722 area, above which the Gold price could accelerate the move up towards the $2,748-2,750 supply zone. The momentum could extend further towards retesting the all-time peak, around the $2,790 region touched in late October.