Gold Price Surrenders Most Intraday Gains: Downside Risks Remain Contained
Gold prices lose most of their intraday gains as rising U.S. bond yields and a strong U.S. Dollar weigh on XAU/USD. Geopolitical tensions and expectations for the Fed's rate cut decision next week keep downside risks limited.
Gold Price Surrenders Most Intraday Gains; Downside Risks Remain Contained
NEWS | 12/13/2024 08:22:57 GMT | By BCBNews.org
Gold Price Struggles Amid Mixed Signals
Gold prices (XAU/USD) lost a significant portion of their intraday gains during the European session on Friday, retreating to the lower bounds of the daily range. Investors remain cautious as expectations grow that the Federal Reserve (Fed) will maintain a conservative stance on cutting interest rates. Elevated U.S. Treasury bond yields, supported by stalled progress in reducing inflation to the 2% target, have bolstered the U.S. Dollar (USD). This dynamic has limited upward movement for the non-yielding yellow metal.
Despite this, the downside for gold appears constrained as markets await the Fed’s two-day policy meeting next week. Alongside economic concerns, geopolitical risks from the Russia-Ukraine conflict, tensions in the Middle East, and uncertainties around U.S. trade policies add to the appeal of gold as a safe-haven asset.
Geopolitical Tensions and Economic Factors Drive Mixed Sentiment
- Russia-Ukraine Conflict: Ukraine has reportedly launched U.S.-supplied missiles targeting Russian strategic sites, while Russian forces edge closer to capturing Pokrovsk after prolonged fighting.
- Middle East Tensions: Israel announced that its military would retain control over Syrian territories until a new security arrangement is established.
Such developments intensify geopolitical risks, spurring safe-haven flows into gold. Simultaneously, markets anticipate the Federal Reserve may lower interest rates at its December meeting, further influencing investor sentiment.
The Producer Price Index (PPI) report revealed an annual rise to 3% in November, suggesting inflationary pressures persist. This reinforces expectations that the Fed will adopt a cautious stance on rate cuts, contributing to elevated U.S. bond yields and a stronger USD — factors that may continue to cap gold's upward potential.
Technical Outlook: Key Levels to Watch
Resistance Levels:
- $2,700: Immediate threshold.
- $2,725-$2,726: Monthly high and intermediate hurdle.
- $2,748-$2,750: Critical supply zone.
- $2,775: Next major barrier.
- $2,800: All-time high reached in October.
Support Levels:
- $2,675-$2,674: Strong immediate support.
- $2,658-$2,656: Key confluence of 50- and 200-period SMAs.
- $2,632-$2,630: Secondary support.
- $2,600: Psychological benchmark.
A decisive break below $2,675 could trigger technical selling, exposing gold prices to further declines. Conversely, a sustained move above $2,700 may open the path for a bullish continuation.
Currency Heat Map: Weekly Performance of USD
| Base / Quote | USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF |
|---|---|---|---|---|---|---|---|---|
| USD | — | +0.97% | +0.87% | +2.03% | +0.49% | +0.30% | +1.30% | +1.69% |
| EUR | -0.97% | — | -0.09% | +1.18% | -0.40% | -0.58% | +0.40% | +0.79% |
| GBP | -0.87% | +0.09% | — | +1.06% | -0.31% | -0.49% | +0.49% | +0.88% |
| JPY | -2.03% | -1.18% | -1.06% | — | -1.54% | -1.61% | -0.84% | -0.25% |
The U.S. Dollar has shown remarkable strength, particularly against the Japanese Yen (+2.03%), while its smallest gain is against the Australian Dollar (+0.30%).
Market Outlook: Awaiting the Fed’s Decision
Investors eagerly await next week’s FOMC meeting for clarity on the Fed’s interest rate trajectory. The decision will likely influence the U.S. Dollar and gold price momentum, with XAU/USD facing pivotal technical and fundamental turning points.
By BCBNews.org
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