Gold prices experienced a modest increase on Tuesday, fueled by a decline in US bond yields. However, the Federal Reserve's hawkish stance and a strong US jobs report capped gains. Traders await the US Producer Price Index (PPI) release for further direction.
Gold prices experienced a modest recovery on Tuesday, driven by a slight decline in US bond yields. Reports suggesting President-elect Donald Trump's economic advisors are considering a gradual increase in tariffs to mitigate inflation risks fueled this downward pressure on bond yields, benefiting the non-yielding gold. However, the Federal Reserve 's (Fed) recent hawkish stance, reinforced by a strong US Nonfarm Payrolls report, limited aggressive bullish bets on gold and capped gains.
The robust NFP data strengthened expectations for a slower pace of interest rate cuts by the Fed this year, bolstering the US Dollar (USD) and potentially pushing US bond yields higher. Furthermore, easing concerns about disruptive trade tariffs under Trump 2.0 boosted investor confidence, contributing to the gold price's modest appreciation. Traders are now eagerly awaiting the US Producer Price Index (PPI) release later in the North American session for further market direction. From a technical standpoint, gold prices face potential resistance near $2,700. A sustained breakout above the $2,676-2,677 zone could encounter resistance near $2,690 before potentially reaching $2,700. Further buying momentum beyond $2,700 could extend the ongoing three-week uptrend, propelling the price towards the $2,716-2,717 level and ultimately towards the December monthly swing high, around $2,726. Conversely, support around $2,657-2,656, Monday's low, may hold the immediate downside. However, a decisive break below this level could accelerate the price decline towards $2,635. The downward trajectory might further extend towards the $2,610 confluence, encompassing the 100-day Exponential Moving Average (SMA) and a multi-week-old ascending trend line.The prevailing market sentiment, characterized by a gradual easing of risk aversion, is reflected in the performance of various assets. While gold, traditionally seen as a safe haven during times of uncertainty, benefits from a slight pullback in risk appetite, other assets like stocks and commodities, particularly those sensitive to economic growth, tend to perform well in a risk-on environment. Conversely, in a risk-off scenario, investors typically flock towards safe-haven assets such as bonds, the US dollar, and gold, seeking to preserve capital in the face of looming uncertainties
Gold Price US Bond Yields Federal Reserve Inflation Risk Sentiment Producer Price Index
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