Gold starts a bearish consolidation period.
The price of gold (XAUUSD) still at a one-week low that reached earlier this Monday as it continues its consolidative price movement into the European session. A challenge for the non-yielding yellow metal is the growing consensus that the Fed would limit the speed of its rate-cutting cycle in the face of indications that the progress in bringing inflation down to the 2% objective has halted. However, a mix of provides the commodity with some assistance.
The USD, weaker US bond yields, and geopolitical concerns provide some support for the XAUUSD exchange rate.
Bulls of the US dollar (USD) remain cautious due to a slight decline in the yields on US Treasury bonds. Furthermore, worries regarding the policies of US President-elect Donald Trump and ongoing geopolitical threats serve to limit the price of gold’s decline. Ahead of Wednesday’s pivotal FOMC policy meeting, which will be watch for clues about the future course of rate cuts and provide the bullion a new boost, traders may also choose not to place directional bets.
Daily Market update: Demand for safe haven assets provides some support for the price of gold, but forecasts on a less dovish Fed limit the upside.
The risk increased when Israel pledged to use state funds to increase its presence and quadruple its population in the occupied Golan Heights of the region’s tensions continuing to rise.
The Israeli military reported that its air and ground forces in the northern part of the enclave killed dozens of militants and seized others, while Israeli bombings in Gaza killed at least 53 Palestinians.
Russian President Vladimir Putin has threatened to obliterate Ukraine and may target other European nations next, according to NATO Secretary General Mark Rutte.
Israeli fighter jets carried out an airstrike on radars in eastern Syria and attacked missile sites in southern Syria, according to the Syrian Observatory for Human Rights.
Gold seems to be capped by bets on a less dovish Fed.
According to the FedWatch Tool from the CME Group, traders are pricing in a greater than 93% possibility that the Fed will reduce borrowing costs by 25 basis points points on Wednesday.
Expectations that the Fed will decrease the speed of its rate-cutting cycle next year were strengthened by last week’s releases of the US Producer Price Index (PPI) and Consumer Price Index (CPI).
In anticipation of a less dovish Fed, which would limit increases for the non-yielding gold price, the yield on the benchmark 10-year US government bond increased to a three-week high on Friday.
The release of global flash PMIs on Monday’s economic schedule could have an impact on the general risk attitude and provide the safe-haven precious metal some boost.
But Wednesday’s pivotal FOMC decision will be the main focus. Additionally, Fed Chair Jerome Powell’s comments and the accompanying policy statement will provide as guidance for traders.
