Gold falls as US dollar rises, investors pay attention to US inflation data

Gold Falls as Trump Victory Reduces Political Risk; focus on potential inflation policy.
The U.S. dollar recovery is putting pressure on Bullion despite lower Treasury yields.
Powell signals gradual adjustments to interest rates, leaving the Fed’s path open amid mighty economic conditions.

Gold prices fell on Friday as the dollar recovered despite falling U.S. Treasury yields. Traders continued to digest Donald Trump’s victory in the US elections and circumscribed their exposure to the so-called “trade with Trump” due to uncertainty over tariffs. The XAU/USD rate is $2,688, down over 0.67%.

American stocks continued their gains, ignoring pre-election fluctuations, which were the main factors driving the zloty’s growth. However, the risks associated with US policy have subsided and market participants will look towards Trump’s policies.

After his victory, the US dollar strengthened, although investors expect a less dovish decision from the Federal Reserve (Fed). Some of Trump’s policies are seen as inflation-prone, which would put pressure on the US central bank.

The Fed lowered interest rates on Thursday, recognizing the mighty economy, cooling labor market and ongoing disinflation. However, Fed officials commented that inflation “remains somewhat elevated” despite getting closer to the 2% target.

Fed Chair Jerome Powell did not provide future monetary policy guidance and left options open at upcoming meetings. He emphasized that the Fed can afford to take time to cut interest rates because of the mighty economy. He acknowledged that policy remains restrictive even after today’s rate cut as officials seek to bring rates to neutral levels.

The U.S. economic schedule included the release of the University of Michigan (UoM) consumer sentiment report for November, which crushed the final reading in October. The same report revealed Americans’ mixed views on inflation expectations in the tiny and long term.

Next week, the path of gold will be influenced by the US economic situation. Traders will be paying attention to comments from Federal Reserve officials as well as key data releases on consumer and producer inflation and retail sales.

Daily Digest Market Changes: Gold Price Falls as Data Strengthens Dollar

Gold prices fell as the U.S. real yield, which inversely correlates with gold prices, rose and rose two basis points to 1.978%.
The US dollar index (DXY), which tracks the dollar against six other indices, rose 0.70% to 105.09 on Friday. Yields, particularly on the 10-year benchmark coupon, fell two basis points to 4.30%.
UoM’s preliminary November consumer sentiment reading increased from 70.5 to 73.0, an enhance of 3.5%. Poll director Joanne Hsu noted: “While current conditions have changed minimally, the expectations index has increased across the board, reaching its highest level since July 2021.”
Annual inflation expectations decreased slightly, from 2.7% to 2.6%, while the five-year outlook increased from 3.0% to 3.1%.
According to the Chicago Board of Trade’s December Federal Funds Futures Contract, investors now expect the Fed to ease monetary policy by about 24.5 basis points by the end of the year.

XAU/USD Technical Outlook: Gold Price Falls with Sellers Expecting $2,650

The price of gold is retreating from a two-day high near $2,700, a key level that was breached on Wednesday and buyers were unable to break it. If sellers hold steady and send prices below the November 6 low of $2,652, look for incentive to challenge $2,639 before testing the October 10 low of $2,603.

On the other hand, if gold reaches $2,700, buyers will look to the 20-day SMA at $2,718, ahead of $2,750, followed by the October 23 high of $2,758.

Momentum remains neutral as the Relative Strength Index (RSI) is oscillating around the neutral line, which means XAU/USD may lack clear direction and consolidation may occur.