The rise in geopolitical tensions in the Middle East provides some support for the gold price.
The gold price (XAUUSD) attracts some buying on the opening day of the new week. And maintains its modest intraday gains moving into the European session. With bulls looking for a break of the 50-day Simple Moving Average (SMA). The deaths of three US Army personnel in a drone assault by Iran-backed militant groups raises the prospect of more geopolitical tensions. In the Middle East, weighing on investor mood. This is seen in a generally weaker tone in the equities markets. Which offers support to the safe-haven precious metal.
Sliding US bond yields help the XAUUSD, albeit the rally is short-lived.
Meanwhile, the flight to safety, combined with prospects of a gentle landing for the US economy. Lowers US Treasury bond yields and prevents the US Dollar (USD) from breaking through a nearly two-week-old trading range. This is viewed as another aspect providing a tailwind for the gold price. However, the non-yielding yellow metal’s upside is limited by the Federal Reserve’s (Fed) declining prospects of a more aggressive policy easing in 2024. Traders appear hesitant and prefer to wait for the outcome of the FOMC’s two-day monetary policy meeting on Wednesday.
Daily Market Movers: Gold Price profits from rising Middle East tensions and weaker US bond yields.
On the opening day of a new week, investors are concerned about the possibility of further escalation of geopolitical tensions in the Middle East, which supports the safe-haven Gold price.
A drone assault on a US base in Jordan killed three US soldiers, the first US service members killed in the region since the Hamas-Israel battle began on October 7.
President Joe Biden reaffirmed his threat of retaliation, saying that the United States will retaliate and hold all those responsible accountable at our discretion.
The US Dollar (USD) remains slightly below a one-month high as investors continue to Reduce their expectations for a more aggressive easing by the Federal Reserve.
However, data released on Friday indicated that inflation increased marginally in December, reinforcing views that the Fed will begin reducing interest rates by the middle of 2024.
According to the US Bureau of Economic Analysis. The Personal Consumption Expenditures (PCE) Price Index remained stable at 2.6% year on year in December.
Meanwhile, the annual Core PCE Price Index, the Fed’s preferred measure of inflation. Fell more than expected to 2.9% from 3.2% in November.
Other figures from the release revealed that Personal Spending increased by 0.7% in December. While Personal Income increased by 0.3%, indicating solid demand from US consumers.
This is on top of the better US Q4 GDP print earlier last week and indicating. That the economy is still in good shape, boosting hopes for a soft landing.
A minor fall in US Treasury bond yields limits the Greenback’s further advances. And may continue to function as a tailwind for the non-yielding yellow metal.
Traders were cautious ahead of the critical two-day FOMC monetary policy meeting.
Traders may also want to wait for the FOMC meeting on Tuesday and this week’s significant US macro data. Which includes the Nonfarm Payrolls (NFP) report on Friday.
