Gold Price Pulls Back Amid Strengthening US Dollar

Gold price (XAU/USD) retreats from a one-and-a-half-week high reached during the Asian session, trading near the $2,635–$2,636 range. Despite this pullback, gold remains on track for a third consecutive day of gains as geopolitical tensions and cautious market sentiment support demand for the safe-haven asset. However, a modest recovery in US Dollar (USD) demand, driven by higher Treasury yields, limits further upside for the non-yielding yellow metal.

Key Drivers and Market Dynamics

Geopolitical Tensions:

The ongoing Russia-Ukraine conflict continues to drive safe-haven flows.
Russian President Vladimir Putin’s updated nuclear doctrine and Ukraine’s deployment of US-made ATACMS missiles heighten geopolitical risks.
Despite these developments, statements from both Russia and the US seeking to avoid nuclear conflict help temper market fears.

US Dollar and Treasury Yields:

Optimism surrounding US President-elect Donald Trump’s economic policies has revived expectations of inflationary pressures, supporting US Treasury yields and bolstering the USD.
The CME Group’s FedWatch Tool indicates less than a 60% probability of a 25 bps rate cut in December, suggesting the Federal Reserve might take a less dovish stance.

Federal Reserve Outlook:

Comments from Federal Reserve officials hint at a willingness to curb inflation even at the cost of higher interest rates.
Traders await speeches from influential FOMC members, which could provide further clarity on the Fed’s policy direction and influence near-term gold price movements.

Technical Analysis: Key Levels to Watch

Upside Potential:

Gold’s recovery from last week’s two-month low has broken the 38.2% Fibonacci retracement level, signaling bullish momentum.
Immediate resistance lies at the $2,658–$2,660 range, followed by a congestion zone near $2,670–$2,672. Sustained buying could push prices toward the psychological $2,700 mark.

Downside Risks:

Immediate support is seen at $2,622–$2,620, with stronger support at $2,600.
A break below $2,600 could expose gold to further declines, targeting the 100-day Simple Moving Average (SMA) around $2,555 and last week’s swing low at $2,537–$2,536.

Outlook and Upcoming Catalysts

While gold’s near-term trajectory remains influenced by geopolitical concerns and USD strength, the market’s focus is on upcoming FOMC member speeches and US economic data. These factors will play a critical role in shaping expectations around Federal Reserve policy, bond yields, and the USD, ultimately determining the direction for gold prices.

For now, $2,600 is a pivotal support level, while $2,700 acts as a key psychological barrier for bulls.