- Gold is up 0.67% at the end of the session, but geopolitical conflicts keep its price above $2,600 despite monthly losses.
- The escalation of the Russian-Ukrainian conflict and tensions in the Middle East underline Gold’s attractiveness as a safe and sound haven.
- Market optimism is increasing following the Fed’s 25-basis-point rate cut in December, which strengthens Bullion’s near-term prospects.
The price of gold rose 0.67% at the end of the North American session on Friday, although monthly losses are still expected to be more than 3%. Geopolitical risks continue to drive price action, with the unprofitable metal trading around $2,600. The XAU/USD rate is at $2,652 after hitting an intraday low of $2,634.
Geopolitical tensions in the Middle East have eased after Israel and Lebanon agreed to a ceasefire. Nevertheless, both countries accused each other of violating the agreement.
Recently, Sky News Arabia revealed that the Israeli army announced the bombing of an airstrike on a mobile missile platform belonging to Hezbollah in southern Lebanon.
Gold prices may remain competitive after the escalation of the Russian-Ukrainian conflict. During the week, Russia attacked Ukraine’s energy infrastructure and threatened ballistic missile attacks. Russia’s response is to retaliate against the US and UK allowing the deployment of missiles manufactured in both countries in Russia.
In November, gold prices were slowed down by the victory of US President-elect Donald Trump on November 5. Some of his proposals, such as imposing tariffs and cutting taxes, are susceptible to inflation.
This strengthened the dollar, which will end November with a gain of more than 2%, according to the US dollar index (DXY). Speculation that the fiscal policy of the recent US administration is expansionary may prevent the Federal Reserve (Fed) from further reducing interest rates.
The selection of Scott Bessent as Treasury secretary in the incoming Trump administration calmed markets and supported gold prices last week. Investors view Bessent as market-friendly, which could soften Trump’s tough trade policies.
Therefore, market participants are sanguine that the Fed will reduce interest rates by 25 basis points at the December meeting. According to CME FedWatch Tool, the swaps market sees the probability of such a decision at 66%.
Daily summary of market changes: Gold price supported by lower real yields in the US
- Gold prices rose as the U.S. real yield fell seven basis points to 1.92%.
- The 10-year U.S. Treasury yield falls six basis points to 4.182%.
- The US Dollar Index (DXY), which tracks the dollar’s performance against six currencies, fell 0.37% to 105.75 on the day. However, it is expected to print gains of over 1.79% for the month.
- The latest U.S. GDP data and the Personal Consumption Expenditures (PCE) price index indicate that the U.S. economy remains forceful and monetary easing may need to be paused.
- However, Fed representatives seemed convinced that further easing of monetary policy was necessary and could reduce interest rates at the December meeting. However, they adopted a more cautious stance, opening the door to halting the monetary policy easing cycle.
- Data from the Chicago Board of Trade from the December Federal Funds Rate Futures contract show that investors estimate the Fed will be at 24 basis points by the end of 2024.
Technical Outlook: Gold price is rising but remains below the 50-day SMA
Gold prices remain bullish but are trading within the 50- and 100-day plain moving averages (SMAs), each at $2,668 and $2,572, respectively. Buyers must settle the 50-day SMA to be eligible to test $2,700. With further strength, the next resistance level for XAU/USD will be the psychological $2,750 and the all-time high at $2,790.
On the other hand, if sellers drag the unprofitable metal below $2,600, they could target the 100-day SMA ahead of the November 14 low of $2,536.
