Gold Price Outlook: Factors Influencing Movement
- Supply Pressure: Gold price faced fresh supply, leading to a decline in recovery gains.
- USD Demand: Trump trade optimism boosted USD demand, impacting the precious metal.
- US Bond Yields: Retreating US bond yields and expectations of further Fed rate cuts could influence future movements.
During the European session on Friday, the Gold price (XAU/USD) dipped to around $2,680 due to a combination of factors affecting its valuation. The positive outlook on Trump’s economic policies and inflation overshadowed the Fed’s dovish stance, leading to increased demand for the US Dollar (USD). Additionally, a generally positive risk sentiment in the market contributed to the decline in the safe-haven asset.
USD Demand and Risk Sentiment Impact
- Traders closed profitable Trump trades, causing a corrective decline in the USD, which boosted Gold price on Thursday.
- The USD continued to decline after the Fed’s decision to lower its benchmark rate by 25 basis points, supporting employment over inflation.
- Fed Chair Powell’s comments post-meeting indicated a likelihood of further rate cuts, affecting US Treasury bond yields.
- Market speculations on economic policy shifts post-Trump’s election victory and potential Chinese stimulus add to the risk-on mood.
Technical Analysis: Key Levels to Watch
From a technical standpoint, the Gold price faces resistance near the $2,718 region, with potential upside towards $2,734 and $2,750 if key levels are breached. However, a break below $2,660 support could accelerate a downward slide towards $2,605-2,602.
Analysis and Implications for Investors
The interplay between USD demand, Fed rate cuts, and risk sentiment significantly influences Gold price movements. Investors should monitor key levels such as $2,660 for potential shifts in market dynamics. Understanding these factors can help investors make informed decisions regarding their gold investments and overall portfolio strategies.