November 19, 2024
New Delhi, India
Gold prices
Gold prices (XAU/USD) advanced for the second consecutive session on Tuesday, climbing further from last week’s two-month low. The precious metal touched a one-week high near $2,626 during the Asian session, supported by a mix of factors including declining US bond yields, geopolitical tensions, and subdued demand for the US Dollar (USD).
Key Drivers of the Rally
- Softening US Treasury Bond Yields:
- Falling US bond yields have kept USD bulls defensive below their year-to-date highs. This has attracted renewed investor interest in non-yielding assets like gold, driving the metal higher.
- Geopolitical Tensions:
- Elevated geopolitical risks, particularly after US President Joe Biden authorized Ukraine to use long-range missiles against Russian targets, have spurred haven demand for gold.
- Subdued US Dollar Demand:
- The USD’s profit-taking slide from its recent peak has provided additional support to the XAU/USD. Weakening bond yields and concerns over future Federal Reserve policy are key contributors.
Limiting Factors for Gold’s Upside
Despite the bullish momentum, certain factors are likely to cap gold’s gains in the near term:
- Fed’s Policy Outlook:
- Recent comments from Federal Reserve Chair Jerome Powell and other FOMC members suggest a cautious stance on cutting interest rates. This supports the USD and limits the upside potential for gold.
- Inflationary Expectations:
- Market speculation that policies from US President-elect Donald Trump, such as lowering taxes and raising tariffs, may rekindle inflationary pressures could reduce the scope for further rate cuts by the Fed, keeping gold’s gains in check.
Upcoming Economic Events to Watch
Several key events this week could influence gold prices:
- Tuesday:
- Release of US Building Permits and Housing Starts data.
- Speech by Kansas Fed President Jeffrey Schmid, which may offer insights into the Fed’s future policy direction.
- Friday:
- The focus will shift to Manufacturing and Service Sector PMI data, which could provide early indications of how businesses are reacting to Trump’s proposed economic policies.
Outlook for Gold Prices
While gold’s recent rally signals a recovery, the lack of strong follow-through buying suggests caution. The yellow metal remains vulnerable to USD strength and shifts in Fed policy expectations. The combination of geopolitical risks and economic data releases this week will likely shape the near-term direction of XAU/USD.
Gold prices are finding support from safe-haven demand and weakening bond yields, but concerns over reduced Fed rate cuts and a strong USD may cap gains. Investors are advised to monitor upcoming economic releases and geopolitical developments closely.
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