Gold prices fall as US bond yields rise and risk sentiment improves
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Gold prices retreat intraday after hitting a one-and-a-half-week high of $2,642 earlier on Wednesday, pressured by rising US Treasury bond yields and USD strength. The recent uptick in yields, fueled by expectations of less aggressive Federal Reserve rate cuts, drives demand for the US Dollar, weighing on the non-yielding yellow metal.
The pullback also coincides with a positive risk tone in markets, which undermines safe-haven demand for gold. However, escalating geopolitical tensions between Russia and Ukraine provide some support, limiting deeper losses for the precious metal.
Key Drivers Influencing Gold Prices
Geopolitical Risks: Worsening tensions in the Russia-Ukraine conflict continue to bolster safe-haven flows. Russian President Vladimir Putin's recent decree updating the country's nuclear doctrine adds a layer of uncertainty, as does Ukraine's use of US-made missiles for strikes within Russian territory.
US Bond Yields and Dollar Strength: The resumption of the uptrend in US Treasury yields, after a sharp decline on Tuesday, supports the US Dollar. Rising yields reflect market positioning for fewer rate cuts by the Federal Reserve, with traders pricing in less than a 60% chance of a 25-basis-point cut in December.
Fed Policy and Fiscal Expectations: Comments from Kansas Fed President Jeffrey Schmid downplaying inflation risks associated with large fiscal deficits suggest a hawkish stance, potentially requiring higher interest rates to manage inflationary pressures. This limits the appeal of gold as an inflation hedge.
Technical Outlook
Upside Potential: The recovery from last week’s two-month low has propelled gold prices above the 38.2% Fibonacci retracement level of the recent decline. If bullish momentum persists, XAU/USD could target the $2,658-2,660 resistance zone, with further gains potentially extending to $2,670-2,672. A sustained break above these levels could open the path toward the $2,700 psychological mark.
Downside Risks: Immediate support is observed at $2,622-2,620, with the critical $2,600 level acting as a pivotal downside marker. A break below $2,600 could accelerate the decline toward the 100-day Simple Moving Average (SMA) at $2,555, with additional support at $2,570. Further losses may test last week’s low of $2,537-2,536, which, if breached, could trigger a deeper bearish move.
Near-Term Catalysts
Federal Reserve Speeches: Remarks from influential FOMC members later today could provide clarity on the Fed's rate-cut path and impact gold's trajectory.
Broader Market Sentiment: A continued rise in risk appetite could further pressure gold, while any escalation in geopolitical tensions might reinstate its safe-haven appeal.
Gold traders are advised to monitor macroeconomic indicators and geopolitical developments closely, as these factors remain critical to near-term price movements.
The pullback also coincides with a positive risk tone in markets, which undermines safe-haven demand for gold. However, escalating geopolitical tensions between Russia and Ukraine provide some support, limiting deeper losses for the precious metal.
Key Drivers Influencing Gold Prices
Geopolitical Risks: Worsening tensions in the Russia-Ukraine conflict continue to bolster safe-haven flows. Russian President Vladimir Putin's recent decree updating the country's nuclear doctrine adds a layer of uncertainty, as does Ukraine's use of US-made missiles for strikes within Russian territory.
US Bond Yields and Dollar Strength: The resumption of the uptrend in US Treasury yields, after a sharp decline on Tuesday, supports the US Dollar. Rising yields reflect market positioning for fewer rate cuts by the Federal Reserve, with traders pricing in less than a 60% chance of a 25-basis-point cut in December.
Fed Policy and Fiscal Expectations: Comments from Kansas Fed President Jeffrey Schmid downplaying inflation risks associated with large fiscal deficits suggest a hawkish stance, potentially requiring higher interest rates to manage inflationary pressures. This limits the appeal of gold as an inflation hedge.
Technical Outlook
Upside Potential: The recovery from last week’s two-month low has propelled gold prices above the 38.2% Fibonacci retracement level of the recent decline. If bullish momentum persists, XAU/USD could target the $2,658-2,660 resistance zone, with further gains potentially extending to $2,670-2,672. A sustained break above these levels could open the path toward the $2,700 psychological mark.
Downside Risks: Immediate support is observed at $2,622-2,620, with the critical $2,600 level acting as a pivotal downside marker. A break below $2,600 could accelerate the decline toward the 100-day Simple Moving Average (SMA) at $2,555, with additional support at $2,570. Further losses may test last week’s low of $2,537-2,536, which, if breached, could trigger a deeper bearish move.
Near-Term Catalysts
Federal Reserve Speeches: Remarks from influential FOMC members later today could provide clarity on the Fed's rate-cut path and impact gold's trajectory.
Broader Market Sentiment: A continued rise in risk appetite could further pressure gold, while any escalation in geopolitical tensions might reinstate its safe-haven appeal.
Gold traders are advised to monitor macroeconomic indicators and geopolitical developments closely, as these factors remain critical to near-term price movements.