Gold met with fresh supply, eroding some of the overnight recovery gains.
The gold price (XAUUSD) fell to $2,680 during the first half of the European session on Friday, pushed by a number of factors. Hopes that Trump’s initiatives will boost economic growth and inflation outweigh the Federal Reserve’s (Fed) dovish outlook, which helps reinvigorate US Dollar (USD) demand. Aside from that, an overall positive risk tone contradicts the Precious metal used as a safe haven.
Falling US bond yields and bets for future Fed rate cuts may help limit losses.
The falling US Treasury bond yields may discourage US bulls from making aggressive bets, limiting any further depreciation of the non-yielding gold price. Nonetheless, the XAUUSD appears to have paused its promising rebound from the 50-day Simple Moving Average (SMA) support, or above a three-week low reached on Thursday, and is on track to fall for the second week in a row.
Daily Market Update:Gold prices continue to be pushed down by an increase in USD demand and a risk-on mentality.
Traders closed out some winning Trump trades on Thursday, causing the US Dollar to fall from a four-month high and providing a slight boost to the Gold price.
The USD fall continued continuous after the Federal Reserve chose to decrease its benchmark overnight borrowing rate by 25 basis points, to a target range of 4.50% to 4.75%.
In the accompanying policy statement, Fed officials defended the easing mode by stating that sustaining employment is becoming at least as important as containing inflation.
Furthermore, during the post-meeting news conference, Fed Chair Jerome Powell failed to provide indications that the central bank may suspend rate decreases in the near future due to persistent inflation.
According to the CME Group’s FedWatch Tool, traders are pricing in a 75% chance that the Fed will cut rates again in December, resulting in another drop in US Treasury bond yields.
Donald Trump’s presidential election victory has fuelled discussion about economic policy reforms that could boost deficits and inflation , and limit the Fed’s capacity to lower interest rates.
Meanwhile, prospects for an announcement of extra stimulus from China following a five-day meeting of the NPC’s Standing Committee continue to fuel the positive mood.
