Gold trade limit by trump-related trades hold the USD near a multi-month high.
After its worst weekly loss in over five months, the gold price (XAUUSD) plummeted more than 2% on Monday, reaching its lowest level since October 10 amid strong follow-through US Dollar (USD) purchasing. Traders expect the Federal Reserve (Fed) to take a cautious stance moving forward, with hopes that US President-elect Donald Trump’s policies will enhance economic growth and inflation. This, in turn, continues to sustain the elevated US Treasury bond yields This drove the USD to a four-month high and weighed severely on the non-yielding yellow metal.
Elevated US bond yields increase the likelihood that XAUUSD may fall further.
The downward trend came to a halt just before the $2,600 mark, owing to concerns about the global economy’s impact from Trump’s protectionist measures. This, in turn, stimulates some haven flows and helps the gold price remain stable during the Asian session on Tuesday. Any real recovery, however, is elusive in light of the underlying strong bullish mood surrounding the dollar. Traders may also choose to stay on the sidelines ahead of this week’s release of US consumer inflation data and speeches by key FOMC members, including Fed Chair Jerome Powell concerns about Trump’s protectionist policies help sustain the gold price.
Daily Market Movers: Golld price (XAUUSD) plummeted more than 2% on Monday, reaching its lowest level since October 10.
The US Dollar continued its positive trend Following Donald Trump’s victory in the US presidential election, the trend accelerated and reached its highest level since early July, prompting strong selling around the gold price on Monday.
Trump’s expansionary plans and corporate tax cuts may put upward pressure on inflation, limiting the Federal Reserve’s ability to loosen monetary policy further. This continues to support the greenback.
Minneapolis Fed President Neel Kashkari stated on Sunday that the central bank wants to be confident and needs more proof that inflation would return to the 2% objective before deciding on more interest rate decreases.
US Treasury bond rates remain stable below the post-election swing high as investors consider the broader ramifications of Trump’s victory in the US presidential election. Elections on fiscal policy and interest rate cuts are expected.
Prior to the election, Trump promised to impose a 10% tariff on all imports. This raises concerns about an escalation of the global trade war and provides some support for the safe-haven XAUUSD.
Traders are now waiting for comments from important FOMC members, including Fed Chair Jerome Powell, for clues about the future of US interest rates, amid speculation that the US central bank could delay its lowering cycle.
According to the CME Group’s Fedwatch tool, traders are now pricing in a 65% chance of another 25 basis point rate decrease from the Fed and a 35% chance of a ‘no change’ at the next FOMC monetary policy meeting in December.
Investors this week will In addition, the release of US consumer inflation numbers and the US Producer Price Index (PPI) may contribute to defining the next leg of the commodity’s directional move.
