Gold prices (XAU/USD) saw modest recovery during Tuesday’s Asian session, buoyed by dip-buying after the previous day’s decline from a one-month high. Reports suggesting that US President-elect Donald Trump’s economic advisers are contemplating a gradual increase in tariffs helped lower US Treasury bond yields, providing support for the non-yielding metal. However, the rebound remains limited amid a hawkish Federal Reserve outlook.
Gold Supported by Falling Yields but Fed Outlook Weighs
The US Nonfarm Payrolls (NFP) report, released Friday, reinforced expectations of a slower pace of rate cuts from the Federal Reserve in 2025. This bolstered the US Dollar, which stalled its recent pullback, and capped significant upside potential for gold.
Meanwhile, easing concerns about abrupt tariff changes under the Trump administration improved risk sentiment, curbing demand for safe-haven assets like gold. Market participants are now focusing on the US Producer Price Index (PPI) data due later today for further direction.
Market Highlights
Tariff Strategy: Bloomberg reported that Trump’s team plans to gradually increase tariffs to manage inflation risks and enhance negotiating leverage, easing pressure on bond yields and supporting gold prices.
Fed and Yields: Despite a slight retreat in 10-year US Treasury yields from a 14-month high, the Federal Reserve’s cautious rate-cut approach has kept yields relatively elevated, limiting gold’s rally.
Geopolitical Developments: Progress in US-mediated talks for a ceasefire in Ukraine and hostages’ release by Hamas also contributed to a reduced appetite for safe-haven assets.
Technical Outlook: Gold Bulls Hold Advantage
Gold remains supported above the $2,610 level, a confluence of its 100-day Exponential Moving Average (EMA) and a long-standing ascending trend line.
Upside Levels: Immediate resistance lies near $2,676-2,677, with further hurdles at $2,690 and $2,700. A sustained break above $2,700 could propel prices toward $2,716-2,717, en route to the December swing high around $2,726.
Downside Risks: Key support rests at $2,657-2,656. A breach of this level could trigger a decline toward $2,635, with additional downside possible at $2,610.
Outlook
While gold prices find support from easing bond yields, the Federal Reserve’s hawkish stance and improving risk sentiment are likely to constrain substantial gains. Investors await key US inflation data for clearer market direction.
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