Gold prices remain strongly on offer amid renewed USD buying interest

• Gold prices face strong supply on Monday, ending a four-day winning streak.
• Rising US bond yields are helping to boost demand for the USD and putting pressure on the commodity.
• Trade war concerns and geopolitical risks do little to support XAU/USD.

Gold prices see heavy selling at the start of a new week/month, falling to the $2,623-$2,622 range during the Asian session, ending a four-day winning streak as demand for the US Dollar (USD) picks up significantly . Expectations that US President-elect Donald Trump’s tariff plans could reignite inflationary pressures and limit the scope for rate cuts by the Federal Reserve (Fed) are causing US Treasury yields to rise again. This, in turn, is helping the USD recover sharply from its near three-week low hit on Friday and is proving to be a key factor in reversing outflows from the low-yielding yellow metal.

However, markets are still pricing in a greater chance that the Federal Reserve will cut borrowing costs later this month. This, combined with the ongoing geopolitical risks arising from the protracted war between Russia and Ukraine and conflicts in the Middle East, is helping to limit safe-haven gold price losses. Traders also appear cautious, preferring to wait for this week’s key U.S. macro releases, including the closely watched Nonfarm Payrolls (NFP) report, for clues on the Fed’s rate-cutting path. This, in turn, will play a key role in influencing USD price dynamics and determining the next leg of a directional move for XAU/USD.

Gold prices are under pressure from rising US bond yields and a sharp increase in USD demand

• The US dollar rebounded sharply from its lowest level since November 12, reached last Friday, while US Treasury yields rose again, weighing on gold prices as a new week/month begins.
• Investors appear convinced that US President-elect Donald Trump’s tariff plans could trigger the second wave of trade wars and drive up consumer prices, which could force the Federal Reserve to stop cutting interest rates.
• In a critical post over the weekend, Trump threatened a 100 percent tariff on the BRICS nations of Brazil, Russia, India, China and South Africa if they replace the USD with another currency for international transactions.
• Ukrainian President Volodymyr Zelensky has said he is ready to hand over occupied Ukrainian territory to Russia, albeit under certain conditions, in order to reach a ceasefire agreement and achieve peace.
• Russian and Syrian fighter jets have carried out a series of airstrikes on Syrian rebels led by the jihadist group Hayat Tahrir al-Sham, which seized most of Aleppo and entered the city of Hama in a shock offensive on Saturday.
• China’s official manufacturing purchasing managers’ index (PMI) rose to 50.3 in November from 50.2, while the NBS non-manufacturing PMI fell to 50.0 in the month under review from 50.2 in October.
• China’s Caixin manufacturing purchasing managers’ index (PMI) jumped to 51.5 in November from 50.3 in October. The reason for this is the hope that the government will introduce further incentives to boost domestic demand.
• This week’s key macroeconomic releases in the US, starting with the ISM manufacturing PMI later on Monday, will be focused on interest rate cuts, which in turn will drive the USD and the non-yielding XAU/USD.

Gold prices appear to be vulnerable; week old ascending channel break in game

From a technical perspective, an intraday slide below the lower boundary of a nearly week-old descending channel could be seen as a key trigger for bearish traders. Additionally, the oscillators on the daily/4-hour charts have started to gain negative traction again, suggesting that the path of least resistance for gold prices is to the downside. Therefore, a subsequent decline towards last week’s swing low, around the $2,605 area, seems quite possible. Some follow-on selling below $2,600 would expose the 100-day SMA (Simple Moving Average), which is currently near $2,575.

On the other hand, the ascending trend channel support breakpoint in the $2,642-$2,643 area may now act as an immediate hurdle ahead of the static resistance at $2,652 and last Friday’s swing high in the $2,665 area. Some follow-on buying should allow gold prices to reclaim the round-digit $2,700 level and further extend the positive move towards the $2,721-2,722 supply zone. The latter should act as a crucial point that, if finally resolved, will indicate that the recent corrective decline from the all-time high reached in October has run its course, paving the way for further appreciation.