December 16, 2024
New Delhi, India
Gold Prices
Gold prices (XAU/USD) edged higher on Monday after briefly dipping to a one-week low near the $2,643-$2,644 mark during the Asian session. The precious metal found support from a combination of softer US Treasury yields and renewed geopolitical tensions, balancing bearish pressures from expectations of a less dovish stance by the Federal Reserve.
Key Drivers Influencing Gold Prices
- US Dollar and Treasury Yields:
- The US Dollar started the week weaker as US bond yields witnessed a slight pullback.
- The benchmark 10-year US Treasury yield, however, rose to a three-week high last Friday, capping gold’s upside momentum due to its non-yielding nature.
- Geopolitical Uncertainty:
- Rising tensions in the Middle East remain a tailwind for safe-haven demand:
- Israel’s strikes in Gaza resulted in at least 53 casualties, while military operations continue in the northern enclave.
- Syria faced Israeli airstrikes targeting missile launchers and radars.
- NATO warnings regarding Russia’s long-term plans for Ukraine have added to broader risk sentiment.
- Rising tensions in the Middle East remain a tailwind for safe-haven demand:
- Federal Reserve Policy Outlook:
- Investors remain cautious ahead of the FOMC decision on Wednesday, with the focus on the Fed’s tone regarding future rate cuts.
- Despite expectations that borrowing costs will remain unchanged, the CME FedWatch Tool indicates a 93% chance of a 25 basis point cut this week.
- Last week’s US CPI and PPI data pointed to lingering inflation concerns, reducing the likelihood of an aggressive easing cycle next year.
- Economic Data Releases:
- Monday’s release of global flash PMIs will influence risk sentiment, potentially impacting gold prices.
- Any weakness in economic activity data could boost gold’s appeal as a safe-haven asset.
Outlook for Gold Prices
- Upside Factors: Renewed geopolitical risks, softer USD, and bond yield pullback.
- Downside Risks: Expectations of a less dovish Fed stance and stronger economic data, which could pressure gold prices.
Technical Levels to Watch:
- Support: $2,640 and $2,620
- Resistance: $2,670 and $2,685
Market participants remain on edge ahead of the FOMC policy statement and Fed Chair Jerome Powell’s remarks on Wednesday, which will set the tone for gold’s trajectory. Until then, cautious trading with limited directional bets is likely.
At the time of writingthis article Gold prices XAUUSD was trading around 2,651.050 USD up +2.370 (+0.09%)
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