- Gold price drops, pressured by Trump's tariff threats against BRICS nations, rising US bond yields.
- US ISM Manufacturing PMI hits a six-month high, contributing to a stronger Dollar, limiting Gold's gains.
- Mixed signals from Fed officials on rate cuts keep markets cautious; December FOMC meeting closely watched.
Gold prices slump as the last month of the year begins. They edge lower, weighed down by a strong US Dollar strengthened by Trump’s harsh rhetoric on BRICS countries and some easing of geopolitical tensions. The XAU/USD trades at $2,635, down 0.58%.
The golden metal extended its losses after Trump warned BRICS countries that moving away from the Greenback could make them face 100% tariffs “and should expect to say goodbye to selling into the wonderful U.S. Economy,” he added.
Once Monday’s Asian session got underway, XAU/USD plunged to a daily low of $2,621 before recovering some ground, but the jump in US Treasury bond yields and the US Dollar Index (DXY) capped Gold’s advance.
Data-wise, the US economic docket featured the release of the ISM Manufacturing PMI for November, which rose to its highest reading since June. Earlier, S&P Global announced that manufacturing activity in the United States (US) improved, indicating that the economy remains robust.
The Atlanta Fed GDP Now for Q4 2024 rose from 2.69% to 3.16% after the ISM data release.
Atlanta Fed President Raphael Bostic crossed the wires. Bostic stated he’s undecided on whether a cut this month is needed, but he believes that interest rates should continue to be lowered over the following months. He said that rates should be at a reasonable level that “neither stimulates nor restrains economic activity,” adding that he’s keeping his options open.
In the meantime, the CME FedWatch Tool shows that the odds for a 25-basis point rate cut stand at 63%, down from 66% last Friday. This suggests the December 17-18 meeting would be live.
Regarding geopolitics, US officials are concerned the Lebanon ceasefire could unravel, according to Axios. The White House is concerned that the fragile ceasefire in Lebanon could unravel after Israel and Hezbollah exchanged fire in recent days.
This week, the US economic docket will feature Fed speakers, including Chairman Jerome Powell, the JOLTs Job Openings for October, S&P and ISM Services PMI surveys, and Nonfarm Payroll figures.
Daily digest market movers: Gold price undermined by higher US real yields
- Gold prices dive as US real yields climbed one and a half basis points to 1.936%.
- The US 10-year Treasury bond yield rose almost two basis points to 4.196%.
- The US Dollar Index (DXY), which tracks the buck's performance against six currencies, edged up 0.63% at 106.44 on the day.
- The ISM Manufacturing PMI in November rose from 46.5 to 48.4, exceeding forecasts of 47.5. The S&P Global Manufacturing PMI for the same period increased from 48.5 to 49.7, above the 48.8 expected by the consensus.
- Fed officials seemed convinced that further easing is needed and may cut rates at the December meeting. However, they adopted a more cautious stance, opening the door for a pause in the easing cycle.
- Data from the Chicago Board of Trade, via the December fed funds rate futures contract, shows investors estimate 24 bps of Fed easing by the end of 2024.
Technical outlook: Gold price retreats deeper below 50-day SMA
Gold’s uptrend remains intact, though buyers could not decisively clear the 50-day Simple Moving Average (SMA) of $2,669. Further consolidation lies ahead, as depicted by the Relative Strength Index (RSI) hovering around the 50 neutral line.
That said, if XAU/USD cleared the 50-day SMA, key resistance levels would be exposed, like $2,700, the $2,750 figure, and the all-time high at $2,790. On the other hand, if sellers drag the non-yielding metal below $2,600, they could target the 100-day SMA ahead of the November 14 swing low of $2,536.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Trading Pro
Account
7.2
8.2
7.2
Tools
5.2
Service
6.6
Trading
8.0
Trust
5.0
Experience
7.0
Recommended content
Recommended content
Editors’ Picks
EUR/USD remains below 1.1000 on Powell's remarks
The US Dollar's recovery has gained momentum, pushing EUR/USD down to sub-1.1000 levels—the daily lows—following Fed Chair Jerome Powell's "Economic Outlook" speech.
GBP/USD loses the grip and approaches 1.2900
GBP/USD is shedding some of its weekly gains and retreating back to around the 1.2900 level, as the Greenback continues its recovery following Chair Powell's comments.
Gold remains offered, looks at $3,000
Gold prices are deepening their daily retreat, edging closer to the crucial $3,000 per troy ounce level as the US Dollar strengthens, all while investors digest Fed Chair Powell's speech.
Can Maker break $1,450 hurdle as whales launch buying spree?
Maker holds steadily above $1,250 support as a whale scoops $1.21 million worth of MKR. Addresses with a 100k to 1 million MKR balance now account for 24.27% of Maker’s total supply. Maker battles a bear flag pattern as bulls gather for an epic weekend move.
Strategic implications of “Liberation Day”
Liberation Day in the United States came with extremely protectionist and inward-looking tariff policy aimed at just about all U.S. trading partners. In this report, we outline some of the more strategic implications of Liberation Day and developments we will be paying close attention to going forward.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.