Gold Price Falls Amid Renewed USD Strength, Rising US Bond Yields

Gold prices opened the week under heavy selling pressure, dropping to the $2,623-$2,622 range during the Asian session. This decline halts a four-day winning streak as the US Dollar (USD) gains momentum, supported by rising US Treasury bond yields. Expectations that US President-elect Donald Trump’s proposed tariffs could reignite inflationary pressures and reduce the Federal Reserve’s (Fed) room to cut rates further contributed to the bond yield uptick and USD recovery.

Key Factors Influencing Gold’s Decline

1. USD Strength and Bond Yields:

1. • The USD rebounded from a three-week low, fueled by a fresh surge in US Treasury yields.
   • Markets expect inflation concerns driven by potential tariffs to constrain the Fed’s ability to lower interest rates, adding to the USD’s appeal.

2. Geopolitical Risks and Economic Data Awaited:

1. • While the USD’s recovery pressures gold prices, geopolitical uncertainties in Ukraine, the Middle East, and trade tensions offer some support for the safe-haven metal.
   • Traders are cautious, awaiting key US data releases, such as the ISM Manufacturing PMI and the closely watched Nonfarm Payrolls (NFP), for clarity on the Fed’s rate trajectory.

3. Trump’s Tariff Threats and Global Developments:

1. • Over the weekend, Trump threatened 100% tariffs on BRICS nations if they moved to replace the USD in global transactions.
   • Meanwhile, in Ukraine, President Zelenskyy expressed willingness to negotiate territorial concessions for peace, introducing a potential shift in the conflict’s dynamics.
   • In Syria, escalating airstrikes add to regional instability, indirectly influencing market sentiment.

4. China’s Mixed Economic Signals:

1. • China’s Manufacturing PMI rose slightly to 50.3 in November, signaling modest expansion, while Non-Manufacturing PMI eased to 50.0.
   • The Caixin Manufacturing PMI jumped to 51.5, indicating hope for further government stimulus to boost demand.

Outlook

Gold’s near-term trajectory remains contingent on upcoming US macroeconomic data, particularly the ISM PMI and NFP reports. These figures will influence expectations for Fed rate cuts and drive USD dynamics. The interplay between geopolitical risks and economic signals will also play a crucial role in shaping the XAU/USD pair’s next move.