Gold is rising for the second day in a row as some haven flows driven by geopolitical risks.
The price of gold (XAUUSD) is currently trading around $2,620, just below a one-week high that reached this Tuesday. It has maintained its bid tone throughout the early European session. For the second day in a row, haven flows towards the precious metal primarily driven by geopolitical risks resulting from the protracted Russia-Ukraine war and the ongoing conflicts in the Middle East. Having said that The upside for the non-yielding yellow metal limited by fewer bets on a more aggressive policy easing by the Federal Reserve (Fed).
The USD bulls supported by bets for less aggressive Fed rate cuts, which also limit the commodity’s gains.
Investors now appear certain that the expansionary policies of US President-elect Donald Trump may reignite inflationary pressures and restrict the Fed’s ability to lower interest rates further. As a result, US Treasury bond yields remain high, and the USD continues to stall its corrective decline from last week’s year-to-date high. Aside from this, gains in the price of gold limited by a generally positive mood in the world’s equity markets, which calls for caution before confirming that the recent decline from the all-time high has ended.
Daily Market Movers: Geopolitical tensions boost the price of gold, while less dovish Fed expectations act as a drag.
President Joe The price of gold rose on Monday as a result of Biden’s decision to allow Ukraine to use long-range American missiles against military targets inside Russia.
The US dollar gave the XAUUSD further support by continuing its profit-taking decline from the year-to-date high reached last week on the strength of declining US Treasury bond yields.
Tuesday sees some follow-through buying in the precious metal for the second day in a row, but the upside may be limited by fewer bets on the Federal Reserve’s more aggressive rate cuts.
The incoming administration of US President-elect Donald Trump anticipated to prioritize tax cuts and tariff hikes, which could increase inflation and restrict the Fed’s ability to loosen monetary policy.
Numerous powerful FOMC members, including the Fed Chair Jerome Powell recently recommended lowering rates cautiously, which benefits USD bulls and ought to cap the non-yielding yellow metal.
Building Permits and Housing Starts are on Tuesday’s US economic agenda.
Building Permits and Housing Starts are on Tuesday’s US economic agenda. Furthermore, later in the US session, Kansas Fed President Jeffrey Schmid’s speech will influence the USD.
However, Friday’s manufacturing and service sector PMI data will continue to be the main focus because it may provide early indications of how businesses are responding to the possibility of Trump’s proposed trade tariffs.
