- Gold price falls under pressure from Trump’s tariff threats against BRICS nations and rising US bond yields.
- US ISM Manufacturing PMI hits a six-month high, contributing to a stronger Dollar and capping Gold’s gains.
- Mixed signals from Fed officials on rate cuts keep markets cautious; The December FOMC meeting is closely watched.
Gold prices fall as the last month of the year begins. They fall, weighed down by a strong US dollar supported by Trump’s tough rhetoric on the BRICS countries and some easing of geopolitical tensions. XAU/USD is trading at $2.635, down 0.58%.
The gold metal extended its losses after Trump warned BRICS countries that moving away from the dollar could see them face 100% tariffs “and they should expect to say goodbye to selling into the wonderful American economy,” he added.
Once the Asian session began on Monday, XAU/USD fell to a daily low of $2,621 before regaining some ground, but the jump in US Treasury yields and the US (DXY) limited the advance of Gold.
In terms of data, the US economic agenda included the release of the November ISM Manufacturing PMI, which rose to its highest reading since June. Previously, S&P Global announced that manufacturing activity in the United States (US) improved, indicating that the economy remains robust.
Following the data, the Atlanta Fed’s GDP Now for Q4 2024 rose from 2.69% to 3.16% after the release of the ISM data.
Atlanta Fed President Raphael Bostic crossed the lines. Bostic stated that he is undecided whether a cut is necessary this month, but believes that interest rates should continue to fall in the coming months. He said rates should be at a reasonable level that “neither stimulates nor restricts economic activity,” adding that he is keeping his options open.
Meanwhile, CME’s FedWatch tool shows the odds of a 25 basis point rate cut standing at 63%, down from 66% last Friday. This suggests that the December 17-18 meeting would be live.
As for geopolitics, U.S. officials are worried that the ceasefire in Lebanon could fall apart, according to Axios. The White House is worried that the fragile ceasefire in Lebanon could fall apart after Israel and Hezbollah exchanged fire in recent days.
This week, the US economic agenda will include Fed speakers including Chairman Jerome Powell, October JOLTs job openings, S&P and ISM services PMI surveys, and non-payroll numbers. agricultural.
Daily Market Summary: Gold Price Hit by Rising US Real Yields
- Gold prices fall as US real yields rise one and a half basis points to 1.936%.
- The yield on the 10-year US Treasury bond rose almost two basis points to 4.196%.
- The US Dollar Index (DXY), which tracks the performance of the dollar against six currencies, rose 0.63% to 106.44 on the day.
- The ISM Manufacturing PMI in November rose from 46.5 to 48.4, beating forecasts of 47.5. The S&P Global Manufacturing PMI for the same period rose from 48.5 to 49.7, above the 48.8 expected by consensus.
- Fed officials seemed convinced that further easing is needed and could cut rates at the December meeting. However, they adopted a more cautious stance, opening the door to a pause in the easing cycle.
- Data from the Chicago Board of Trade, via the December federal funds rate futures contract, shows that investors are estimating a 24 bp easing by the Fed by the end of 2024.
Technical Outlook: Gold Price Retraces Deeper Below 50-Day SMA
Gold’s uptrend remains intact, although buyers failed to decisively clear the 50-day SMA of $2,669. Further consolidation is ahead, as shown by the Relative Strength Index (RSI) holding around the neutral line of 50.
That being said, if On the other hand, if sellers drag the unperforming metal below $2,600, they could target the 100-day SMA ahead of the Nov. 14 low of $2,536.
Gold FAQs
Gold has played a fundamental role in human history, as it has been widely used as a store of value and medium of exchange. Today, apart from its brilliance and use for jewelry, the precious metal is considered a safe-haven asset, meaning it is considered a good investment in turbulent times. Gold is also considered a hedge against inflation and currency depreciation, since it does not depend on any specific issuer or government.
Central banks are the largest holders of Gold. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and purchase Gold to improve the perception of strength of the economy and currency. High Gold reserves can be a source of confidence for the solvency of a country. Central banks added 1,136 tons of gold worth about $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the largest annual purchase since records exist. Central banks in emerging economies such as China, India and Türkiye are rapidly increasing their gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are the main reserve and safe haven assets. When the Dollar depreciates, the price of Gold tends to rise, allowing investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken the price of Gold, while sell-offs in riskier markets tend to favor the precious metal.
The price of Gold can move due to a wide range of factors. Geopolitical instability or fear of a deep recession can cause the price of Gold to rise rapidly due to its status as a safe haven asset. As a non-yielding asset, the price of Gold tends to rise when interest rates fall, while rising money prices tend to weigh down the yellow metal. Still, most of the moves depend on how the US Dollar (USD) performs, as the asset is traded in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold in check, while a weaker Dollar is likely to push up Gold prices.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
