The price of gold declines from its one-week peak as some USD dip-buying appears

Gold prices (XAU/USD) continue to maintain a bullish tone in the early European session, trading around the $2,620 level, just below the one-week high reached on Tuesday. Geopolitical tensions, particularly due to the prolonged Russia-Ukraine war and conflicts in the Middle East, are driving safe-haven demand for gold for the second consecutive day. However, expectations of a less aggressive easing policy by the Federal Reserve (Fed) are limiting the upside potential of the non-yielding asset.

Investors appear convinced that US President-elect Donald Trump's proposed expansionary policies could reignite inflationary pressures, thereby reducing the likelihood of further interest rate cuts by the Fed. This keeps US Treasury bond yields elevated, helping the US Dollar (USD) halt its recent pullback from a year-to-date peak reached last week. Additionally, a broadly positive sentiment in global equity markets further limits gains for gold, suggesting caution before confirming that the recent rebound from its peak is sustainable.

For gold price bears, a sustained move below the $2,600 level is necessary before expecting further declines.

The recent strong upward movement follows last week's resilience below the 100-day Simple Moving Average (SMA). The momentum pushed gold above the 23.6% Fibonacci retracement level of its recent pullback from its all-time high, supporting the possibility of further intraday gains. However, oscillators on the daily chart, despite rebounding from lower levels, have yet to fully indicate a positive trend. As a result, any additional gains may encounter significant resistance near the $2,634-$2,635 range or the 38.2% Fibonacci retracement level. Continued buying could potentially spark a short-covering rally towards the $2,655-$2,657 area and then towards the $2,664-$2,665 level.

On the downside, the $2,600 level, which aligns with the 23.6% Fibonacci retracement, currently offers strong support. A decisive break below this level could expose the next significant support zone around $2,569-$2,568 and potentially lead to a decline towards the 100-day SMA, near $2,551-$2,550. Additional selling pressure below last week's low of around $2,536 could provide bearish traders with fresh momentum, potentially driving prices down to the key $2,500 psychological level.

 

 

 

 

 

 

 

 

 

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