Gold prices fell back on Monday from a three-week high set earlier in the session as investors took profits and traders adjusted their expectations for Fed rate cuts, awaiting further data to assess the rate outlook.
As of publication, spot gold plummeted by $35, touching down at $2660 per ounce, a decline of 2.07% for the day. Spot silver fell by 2% to $30.69 per ounce. Last week, gold had its best week since the pandemic began. Before the significant pullback on Monday, prices briefly soared to $2721.
City Index senior analyst Matt Simpson stated that gold prices are under pressure as "some traders hope to take profits near the $2718 high. Given that the U.S. Thanksgiving holiday will shorten the trading week, I am skeptical about whether last week's gains can continue."
According to CME's FedWatch tool, traders believe there is a 51% chance that the Federal Reserve will cut interest rates by 25 basis points again in December, down from 62% last week. Last week, some Fed policymakers expressed concerns that inflation progress may stall and advocated for caution, while others emphasized the need to continue cutting rates.
IG market strategist Yeap Jun Rong stated that the mild policy signals from the U.S. and potential inflation surprises may support keeping rates unchanged in December, and the prospect of a slower rate cut could weigh on gold prices. Investors will focus this week on the minutes from the Fed's November FOMC meeting, GDP data (first revision), and core PCE data.
Meanwhile, the U.S. dollar index fell by 0.7%, limiting further downside for gold and enhancing its appeal to holders of other currencies. The benchmark 10-year U.S. Treasury yield also declined. The easing of geopolitical risks outweighed the bullish impact of falling dollar and Treasury yields, putting pressure on gold prices.
Over the weekend, U.S. President-elect Trump appointed billionaire Scott Bessent as Treasury Secretary. Bessent's appointment to a key position in the Trump administration has reassured the U.S. Treasury market, as he is seen as a Wall Street veteran and a fiscal conservative. This eliminates uncertainty surrounding the Trump administration and will inject more stability into the U.S. economy and financial markets. Bessent, who runs the macro hedge fund Key Square Group, stated that he would support Trump's tariff and tax cut plans, but investors hope he will prioritize economic and market stability over political gains.
Brian Jacobsen, chief economist at Annex Wealth Management, said: "He brings a sense of incrementalism to the government, rather than taking a big bang approach to major policy changes." He said the market may breathe a sigh of relief as his selection signals "an 'America first' government, rather than an 'America alone' government."
The pullback in gold prices is also attributed to the easing of geopolitical tensions between Israel and Lebanon, as reported by Axios, with Israel and Lebanon reportedly nearing a ceasefire agreement.
FXstreet technical analyst states that the upcoming bearish doji will continue to be bearish for gold prices. The 21-day moving average is approaching the 50-day moving average from above. If this situation occurs at the daily close, it will confirm a death cross. These technical indicators suggest that the trend may be shifting in favor of gold sellers.
Recent support is around $2670, at the convergence of the 21-day and 50-day moving averages. If it continues to fall below this level, it could open a new round of declines toward $2600. Before that, it will test the low of $2619 from November 20. On the other hand, gold buyers need a daily closing price above the November 5 high of $2750 to regain upward momentum towards the historical high of $2790.
Article reposted from: Jin Ten Data
