Gold holds above $2,650 as US bond yields retreat
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Gold prices (XAU/USD) experienced a sharp intraday pullback from a three-week high during Monday's early European session, weighed down by a risk-on environment and expectations of slower Federal Reserve (Fed) rate cuts. However, the precious metal has managed to defend the $2,650 level, supported by retreating US bond yields, which could limit further downside in the near term.
Risk-on sentiment and Fed expectations pressure gold
The market’s risk-on tone, fueled by reports of de-escalation in the Middle East and optimism over business-friendly policies under the incoming Trump administration, has weighed on gold’s safe-haven appeal. Reports suggest that Israel and Hezbollah are nearing a ceasefire agreement, boosting investor confidence. Additionally, Scott Bessent’s nomination as US Treasury Secretary, with his conservative stance on fiscal policy, has reassured markets and contributed to a decline in US Treasury yields.
While these factors have exerted downward pressure on gold, traders remain cautious as inflation concerns persist. The Fed is increasingly expected to keep rates on hold in December, with CME Group's FedWatch Tool showing a 55% probability of a 25-basis-point cut. Hawkish remarks from Fed officials and stronger US PMI data, which hit a 31-month high of 55.3 in November, suggest that economic growth may accelerate in Q4, reducing the urgency for rate cuts.
Technical outlook: Key levels to watch
From a technical perspective, gold’s decline has pushed it below the 23.6% Fibonacci retracement level of its recent recovery from the November 14 low. The $2,660-$2,658 range, marked by the 100-period Simple Moving Average (SMA) on the 4-hour chart, currently provides critical support. Oscillators on the 4-hour chart remain in positive territory, signaling that bearish momentum is not yet fully established.
A sustained break below the $2,650 level, which coincides with the 38.2% Fibonacci retracement, could accelerate selling pressure. This would expose the $2,630-$2,629 region (50% retracement) and the $2,610-$2,608 area (61.8% retracement) as potential downside targets.
On the upside, immediate resistance lies at the $2,677-$2,678 range (23.6% Fibonacci level) and the psychological $2,700 mark. A break above these levels could open the door for a move toward the $2,721-$2,722 area, representing the Asian session high. Sustained momentum beyond this point may drive gold prices to the $2,748-$2,750 supply zone, with the possibility of retesting the all-time high of $2,790 recorded in late October.
Strategic implications for traders
Gold’s current price action reflects a delicate balance between bearish and bullish forces. Traders should monitor the $2,650 level closely for signs of follow-through selling, as a break below this support could confirm a deeper correction. Conversely, a rebound above $2,678 and sustained momentum toward $2,700 would indicate renewed buying interest.
With key events ahead, including the release of the US Personal Consumption Expenditures (PCE) Price Index and the Federal Open Market Committee (FOMC) meeting minutes, gold prices are likely to remain sensitive to shifts in inflation expectations and monetary policy outlooks. For now, the interplay between US bond yields and risk sentiment will determine the metal’s near-term trajectory.
Risk-on sentiment and Fed expectations pressure gold
The market’s risk-on tone, fueled by reports of de-escalation in the Middle East and optimism over business-friendly policies under the incoming Trump administration, has weighed on gold’s safe-haven appeal. Reports suggest that Israel and Hezbollah are nearing a ceasefire agreement, boosting investor confidence. Additionally, Scott Bessent’s nomination as US Treasury Secretary, with his conservative stance on fiscal policy, has reassured markets and contributed to a decline in US Treasury yields.
While these factors have exerted downward pressure on gold, traders remain cautious as inflation concerns persist. The Fed is increasingly expected to keep rates on hold in December, with CME Group's FedWatch Tool showing a 55% probability of a 25-basis-point cut. Hawkish remarks from Fed officials and stronger US PMI data, which hit a 31-month high of 55.3 in November, suggest that economic growth may accelerate in Q4, reducing the urgency for rate cuts.
Technical outlook: Key levels to watch
From a technical perspective, gold’s decline has pushed it below the 23.6% Fibonacci retracement level of its recent recovery from the November 14 low. The $2,660-$2,658 range, marked by the 100-period Simple Moving Average (SMA) on the 4-hour chart, currently provides critical support. Oscillators on the 4-hour chart remain in positive territory, signaling that bearish momentum is not yet fully established.
A sustained break below the $2,650 level, which coincides with the 38.2% Fibonacci retracement, could accelerate selling pressure. This would expose the $2,630-$2,629 region (50% retracement) and the $2,610-$2,608 area (61.8% retracement) as potential downside targets.
On the upside, immediate resistance lies at the $2,677-$2,678 range (23.6% Fibonacci level) and the psychological $2,700 mark. A break above these levels could open the door for a move toward the $2,721-$2,722 area, representing the Asian session high. Sustained momentum beyond this point may drive gold prices to the $2,748-$2,750 supply zone, with the possibility of retesting the all-time high of $2,790 recorded in late October.
Strategic implications for traders
Gold’s current price action reflects a delicate balance between bearish and bullish forces. Traders should monitor the $2,650 level closely for signs of follow-through selling, as a break below this support could confirm a deeper correction. Conversely, a rebound above $2,678 and sustained momentum toward $2,700 would indicate renewed buying interest.
With key events ahead, including the release of the US Personal Consumption Expenditures (PCE) Price Index and the Federal Open Market Committee (FOMC) meeting minutes, gold prices are likely to remain sensitive to shifts in inflation expectations and monetary policy outlooks. For now, the interplay between US bond yields and risk sentiment will determine the metal’s near-term trajectory.