Gold prices saw a slight increase on Tuesday, but a lack of strong buying activity kept the gains in check. The Federal Reserve's recent hawkish shift, which suggests fewer interest rate cuts in the future, is supporting the US dollar and putting downward pressure on gold. However, geopolitical tensions and trade war concerns continue to provide support for gold as a safe-haven asset.
Gold price edged higher on Tuesday, albeit lacking strong follow-through buying. The Fed’s hawkish shift acts as a tailwind for the USD and caps the precious metal. Geopolitical tensions and trade war fears should support the safe-haven XAU/USD. Gold price (XAU/USD) attracts some dip-buyers during the Asian session on Tuesday and stalls the overnight modest pullback from a three-day top, though any meaningful appreciating move seems elusive.
The US Dollar (USD) stands firm near a two-year high touched last week amid the Federal Reserve (Fed) hawkish outlook. Furthermore, the prospects for a slower pace of rate cuts by the Fed in 2025 remain supportive of elevated US Treasury bond yields and could act as a headwind for the non-yielding yellow metal. Apart from this, a generally positive tone around the equity markets might contribute to capping gains for the safe-haven Gold price. Meanwhile, the fundamental backdrop seems tilted in favor of bearish traders and suggests that the path of least resistance for the XAU/USD is to the downside. That said, persistent geopolitical risks stemming from the protracted Russia-Ukraine war and tensions in the Middle East, along with concerns about US President-elect Donald Trump's tariff plans, could lend support to the precious metal. Gold price lacks firm near-term direction amid mixed fundamental cues The Federal Reserve last week tempered the outlook for further rate cuts in 2025, marking a turning point in its monetary policy and underscoring uncertainties surrounding potential policy changes under the incoming Trump administration. The yield on the benchmark 10-year US government bond shot to its highest level since May on Monday and the US Dollar stood firm near a two-year peak touched last week, which should cap the upside for the non-yielding Gold price
GOLD FEDERAL RESERVE US DOLLAR GEOPOLITICS TRADE WAR
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