Gold Price Struggles as Bullish USD Caps Gains; $2,600 Level in Focus

Gold (XAU/USD) is struggling to maintain its momentum after a brief bounce from the $2,600 region, marking a one-week low, and continues to face pressure for the second consecutive day as the European session begins on Tuesday. The precious metal saw a modest uptick due to safe-haven demand following US President-elect Donald Trump's tariff threat. However, expectations of a less dovish Federal Reserve (Fed) are limiting further gains for the non-yielding asset.

Market sentiment is also shaped by the growing belief that Trump’s expansionary policies will drive inflation, prompting the Fed to slow down its rate cuts. This has fueled a rise in US Treasury bond yields, which in turn supports the US Dollar (USD) and dampens demand for gold. Additionally, optimism surrounding Scott Bessent’s potential nomination as US Treasury Secretary and a possible Israel-Hezbollah ceasefire are capping gold's gains.

From a technical standpoint, the bounce from the 61.8% Fibonacci retracement level of the recent recovery from a two-month low is likely to encounter resistance around the $2,650 zone, where it faces the 100-period Simple Moving Average (SMA) on the 4-hour chart and the 38.2% Fibonacci level. A breakout above this level could trigger a short-covering rally towards $2,700, heading towards the $2,721-2,722 area.

On the downside, the $2,600 level (61.8% Fibonacci retracement) is expected to offer support. If selling pressure continues, the price could dip towards the 100-day SMA near $2,565. A further decline could push gold towards the monthly swing low around $2,537-2,536. A break below this level would likely signal a bearish trend and extend the sharp retracement from October’s all-time high of $2,800.

Paraphrasing text from "FXSTREET" all rights reserved by the original author.