Gold Prices Retreat for Third Consecutive Week, Hits Two-Month Low Near $2,540
- The $2,500 Mark Loss Could Trigger Deeper Retracement
- Cautious Fed and Trump-led Rally in US Dollar Weigh on Metal
Gold (XAU/USD) experienced a corrective decline for the third consecutive week, reaching a two-month low near $2,540 per troy ounce. This downward trend has raised concerns about the possibility of a deeper retracement in the near future.
After a significant surge in gold prices at the beginning of the year, with a peak around $2,800, the metal faced resistance and subsequently shed around 9% in just a few trading weeks in November. This decline was primarily influenced by external factors impacting the global economy.
The “Trump-Trade” Effect on Gold
Gold performed well in October amid a rally in the US Dollar, driven by expectations of a potential victory for Republican candidate Donald Trump. However, following Trump’s re-election, the US Dollar gained strength, causing pressure on gold prices.
The concerns surrounding the non-yielding metal include potential tariffs on imports, looser fiscal policies, and regulatory changes under the Trump administration. These factors could lead to inflationary pressures, prompting the Federal Reserve to adjust its monetary policies accordingly.
Geopolitical Tensions Support Gold Prices
One of the key drivers of gold prices has been ongoing geopolitical tensions, such as conflicts in Israel, Ukraine, and Russia. These uncertainties in global politics have increased the demand for safe-haven assets like gold, providing support for its price.
President-elect Trump’s stance on resolving international conflicts could further impact gold prices, especially in regions experiencing ongoing turmoil.
Gold Technical Outlook
Gold is expected to revisit its recent low of $2,536, with further downside targets at $2,471, $2,397, and potentially lower levels if the current trend continues. On the upside, resistance levels are around $2,638 and $2,790, with potential for further gains if these levels are breached.
Gold FAQs
Here are some frequently asked questions about gold:
- Role of Gold: Gold is historically used as a store of value, a medium of exchange, and a safe-haven asset during turbulent times.
- Central Banks and Gold: Central banks hold significant gold reserves to support their currencies and improve economic stability.
- Gold and Market Correlations: Gold has inverse correlations with the US Dollar, US Treasuries, and risk assets, impacting its price movement.
- Factors Influencing Gold Prices: Geopolitical instability, economic conditions, interest rates, and the US Dollar play crucial roles in determining gold prices.
Overall, gold prices are influenced by a combination of economic, geopolitical, and market factors, making it a crucial asset for investors to monitor.