Gold prices (XAU/USD) faced selling pressure during the Asian session on Monday, breaking a four-day winning streak and retreating from the $2,700 level, a one-month high reached on Friday. The market’s reaction follows a strong US Nonfarm Payrolls (NFP) report, which has bolstered expectations that the Federal Reserve will pause its rate-cutting cycle in the near term. This has led to higher US Treasury bond yields, which are near their highest levels in over a year, and a US Dollar (USD) that has reached a two-year peak—both factors that are weighing on the non-yielding yellow metal.
While hawkish Fed expectations and ongoing geopolitical tensions dampen risk appetite, they also provide some support for gold as a safe-haven asset. The equity markets’ weaker tone reflects investor caution, helping to limit a significant drop in gold prices. Analysts suggest waiting for more consistent selling before concluding that the recent three-week rally in XAU/USD has run its course. Investors are now looking ahead to the release of US inflation data this week for further market direction.
NFP Report Strengthens Fed’s Pause in Rate Cuts
The US Bureau of Labor Statistics (BLS) reported that Nonfarm Payrolls rose by 256,000 in December, significantly exceeding the previous month’s 212,000 and surpassing market expectations of 160,000. Additionally, the Unemployment Rate unexpectedly declined to 4.1% from 4.2%, while annual wage inflation, as measured by Average Hourly Earnings, slowed to 3.9%. These results reinforce the Federal Reserve’s hawkish stance from December, reducing expectations for further interest rate cuts, which in turn has caused US Treasury yields and the USD to climb.
The yield on the 10-year US Treasury bond spiked to its highest level since late 2023, while the USD Index surged to a two-year high. These elevated yields and the strengthening dollar are acting as headwinds for gold prices, although the ongoing risk-off sentiment continues to provide some support for the precious metal.
Geopolitical Tensions Contribute to Gold’s Safe-Haven Appeal
Geopolitical tensions also add to gold’s safe-haven allure. On Friday, the US and UK imposed tougher sanctions on Russia’s oil industry, targeting nearly 200 vessels in Russia’s shadow fleet. Meanwhile, Russian military strikes on Ukrainian military airfields and continued Israeli strikes in Lebanon and Gaza amid renewed ceasefire talks highlight the ongoing global instability. These tensions have kept investors focused on gold as a hedge against uncertainty.
Technical Analysis: Gold Prices Likely to Find Support
From a technical standpoint, gold prices are expected to find support around the $2,665-$2,664 region if the downward movement continues. A decisive break below this level could lead to a further decline toward the $2,635 level and potentially to $2,605, where the 100-day Exponential Moving Average (EMA) and an ascending trendline converge.
On the upside, gold bulls may wait for a sustained break above $2,700 to signal the next upward move. With positive momentum in oscillators on the daily chart and no overbought conditions yet, gold could rise toward the $2,715 region, followed by potential gains to the $2,730-$2,732 zone and the $2,746-$2,748 supply area.
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