Cautious Fed Expectations Lead to Decline in Gold Prices

Fundamental Analysis

* Fed Watch Uncertainty: Gold prices, denominated in U.S. dollars, have dropped by 3%, marking the largest monthly decline of 2024. This fall was driven by expectations of a cautious Federal Reserve, which boosted the U.S. dollar and applied downward pressure on gold. Following Donald Trump’s victory in the November presidential election, there was growing speculation that his proposed expansionary policies could reignite inflation. Additionally, signs that U.S. inflation reduction efforts stalled in October might prevent the Federal Reserve from further easing its monetary policy. As a result, U.S. bond yields could stabilize, supporting the dollar and causing investors to approach bullish gold positions with caution.

Technical Analysis

* Technical Breakout: Gold price was traded lower while currently testing the support level 2625.00. MACD which illustrate bearish momentum signal with the formation of death cross suggest the commodity to likely further extend its losses.

* Resistance and Support:If the bearish momentum persists, there’s a strong likelihood that the price will potentially head towards the level 2550.00 after it breach below the level 2625.00. Conversely, a potential reversal is also to be expected and the price could head back towards 2685.00.

Potential Risks

Looking ahead, investors will focus on this week’s key U.S. economic data releases, including the ISM Manufacturing PMI, ADP Nonfarm Employment Change, Nonfarm Payrolls, and the Unemployment Rate, to gauge the market’s direction and sentiment.

Learn more about how to navigate the prop trading landscape by checking out PU Xtrader’s trading blogs.

Monitoring

Stay updated on US data, global conflict updates, central bank updates and any shifts in the US Dollar’s strength by following PU Xtrader’s financial news page.

Register For PU Xtrader Challenge And Start Prop Trading

Take Challenge