Gold prices (XAU/USD) are trading with a slight negative bias during the first half of the European session, following a four-day winning streak that had pushed prices to a one-month high on Friday. The recent upbeat US Nonfarm Payrolls (NFP) report has reinforced market expectations that the Federal Reserve (Fed) will pause its rate-cutting cycle later this month, which has kept US Treasury bond yields elevated near their highest levels in over a year. The US Dollar (USD) has also climbed to a two-year peak, exerting pressure on the non-yielding yellow metal.
The stronger-than-expected NFP data, which showed a 256,000 rise in December payrolls, dampened hopes for further rate cuts by the Fed. As a result, US bond yields have surged, with the benchmark 10-year Treasury bond reaching its highest level since late 2023. Simultaneously, the USD Index, which tracks the Greenback against a basket of currencies, has soared to its highest point in over two years. These developments have created headwinds for Gold, which typically struggles in environments of rising yields and a stronger dollar.
Despite this, the risk-off sentiment in global markets, driven by ongoing geopolitical tensions, continues to offer support to the safe-haven Gold price. Weaker equity markets and persistent global uncertainties are preventing any major corrective decline in Gold prices, with many investors adopting a cautious stance. Consequently, market participants are likely to wait for stronger confirmation before positioning for any significant downturn in XAU/USD.
Geopolitical Tensions and Hawkish Fed Support Gold’s Safe-Haven Status
The geopolitical landscape remains tense, with heightened concerns over the ongoing conflict in Ukraine. On Friday, the US and UK imposed tougher sanctions on Russia’s oil industry, targeting nearly 200 vessels in the so-called shadow fleet. Additionally, Russian forces carried out strikes on Ukrainian military airfields, personnel, and vehicles, further escalating tensions. Strikes in Lebanon and Gaza by Israeli forces also added to the global risk environment.
These factors have kept Gold in demand as a safe-haven asset, even amid the pressure from rising bond yields and a stronger USD. However, investors are looking ahead to the release of US inflation figures later this week, which could provide additional direction for Gold prices.
Technical Outlook: Support Levels and Bullish Prospects
From a technical perspective, any further decline in Gold prices could attract buying interest near the $2,665-2,664 region. A break below this level, however, could see Gold prices slide toward the $2,635 area, with further support at the $2,605 level, which aligns with the 100-day Exponential Moving Average (EMA) and a multi-week ascending trendline.
On the upside, Gold bulls will be looking for a sustained move above the $2,700 mark before making fresh bets. The positive momentum seen in oscillators on the daily chart suggests that Gold could rally toward the $2,715 area, with potential gains extending toward the $2,730-2,732 region and the $2,746-2,748 supply zone.
In conclusion, while Gold faces some short-term pressure from hawkish Fed expectations and rising US yields, geopolitical tensions continue to support its safe-haven appeal. Investors are advised to monitor upcoming inflation data for further indications of market direction.
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