The Impact of Recent Developments on Gold Prices
- Gold sees significant sell-off on developments in the Middle East.
- Markets viewed Scott Bessent’s appointment as Treasury Secretary positively.
- Possible ceasefire between Israel and Lebanon keeps Gold heavy.
Gold prices (XAU/USD) experienced a sharp decline during Monday’s North American session due to news of a ceasefire between Lebanon and Israel, leading to increased risk appetite among investors. This, coupled with the nomination of Scott Bessent as the Treasury Secretary for Trump’s administration, exerted downward pressure on the price of the yellow metal. Currently, XAU/USD is trading at $2,620, reflecting a decrease of over 3%.
Factors Driving Gold’s Price Action
The recent sell-off in Gold can be attributed to the improvement in risk appetite among investors. As a non-yielding asset, Gold has fallen below the key 50-day Simple Moving Average (SMA) of $2,664, signaling a potential for further downside movement.
Market participants reacted positively to Bessent’s appointment, with some viewing him as less inclined towards a trade war. His advocacy for a “three-threes” policy, aimed at reducing the US deficit by 3% of annual GDP, achieving a 3% annual GDP growth rate, and increasing US Crude Oil production by 3 million barrels per day, has garnered support from analysts and investors alike.
Additionally, reports of a potential ceasefire between Israel and Lebanon have added to the bearish sentiment surrounding Gold prices, as they reached record highs in response to the Israel-Hezbollah conflict.
Daily Digest of Market Movers: Gold Plummets to Five-Day Low Beneath $2,650
- Gold prices recovered as US real yields dropped by 14 basis points to 1.925% from 2.068%.
- The US Dollar Index declined by over 0.64%, settling at 106.80.
- Probability of a 25 basis points rate cut at the December meeting decreased to 56% according to the CME FedWatch Tool.
- Investors are pricing in a 22-basis-point rate cut by the Federal Reserve by the end of 2024, based on Chicago Board of Trade data via the December fed funds futures contract.
Technical Outlook: Gold Price Sellers Step In, Pushing Prices Under $2,630
The recent price action in Gold saw sellers pushing XAU/USD below the $2,700 level, extending its decline below $2,630. If this level is breached, the next support lies at $2,600, followed by the 100-day SMA at $2,562 and the November 14 swing low at $2,536. On the upside, a move above the 50-day SMA could lead to a challenge of $2,700 and potentially $2,750, with the all-time high at $2,790.
Technical indicators like the Relative Strength Index (RSI) have turned bearish, indicating a prevailing selling pressure in the market.
Frequently Asked Questions about Gold
Gold FAQs
Gold has historically served as a store of value and medium of exchange, and is currently considered a safe-haven asset, making it an attractive investment during times of uncertainty. Central banks, particularly those of emerging economies like China, India, and Turkey, have been increasing their Gold reserves to improve the perceived strength of their currencies and economies.
The price of Gold is influenced by various factors, including geopolitical instability, economic conditions, and the strength of the US Dollar. It typically rises during times of economic uncertainty and inflation fears, while a strong Dollar can exert downward pressure on its price.